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As filed with the Securities and Exchange Commission on July 28, 2000
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
LUCENT TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 22-3408857
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(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
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600 MOUNTAIN AVENUE
MURRAY HILL, NEW JERSEY 07974
(908) 582-8500
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
----------------------------
JEAN F. RANKIN, ESQ.
VICE PRESIDENT--LAW
LUCENT TECHNOLOGIES INC.
600 MOUNTAIN AVENUE
MURRAY HILL, NEW JERSEY 07974
(908) 582-8500
(Name, address, including zip code, and telephone number,
including phone number, of agent for service)
----------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At
such time or times after the effective date of this registration statement as
the selling securityholders shall determine.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /:
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
----------------------------
CALCULATION OF REGISTRATION FEE
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=======================================================================================================================
PROPOSED
PROPOSED MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) OFFERING REGISTRATION
PRICE(1) FEE
=======================================================================================================================
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Common stock, par value $.01 per share,
and related preferred stock purchase 78,813,455 shares $47.656 $3,755,934,011 $991,566.58
rights(2)
=======================================================================================================================
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and based on the average of the high and low
prices of the common stock of Lucent Technologies Inc. as reported on
the New York Stock Exchange on July 27, 2000.
(2) No separate consideration will be received for the rights, which
initially will trade together with the common stock.
------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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Information contained in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
SUBJECT TO COMPLETION DATED JULY 28, 2000
78,813,455 SHARES
LUCENT TECHNOLOGIES INC.
COMMON STOCK
The 78,813,455 shares of our common stock offered by this prospectus
were originally issued by us in connection with our acquisitions of Chromatis
Networks Inc. and Herrmann Technology, Inc. All the shares of our common stock
offered by this prospectus may be sold from time to time by or on behalf of
certain Lucent securityholders. See "Selling Securityholders" and "Plan of
Distribution." The shares were originally issued in private offerings made in
reliance on Section 4(2) of the Securities Act of 1933. In connection with the
acquisitions of Chromatis and Herrmann Technology, we agreed to register the
shares of our common stock offered by this prospectus. We will not receive any
of the proceeds from the sale of the shares by the selling securityholders.
The selling securityholders may sell all or a portion of the shares
from time to time on the New York Stock Exchange, in negotiated transactions or
otherwise, and at prices which will be determined by the prevailing market price
for the shares or in negotiated transactions.
Lucent's common stock is quoted on the New York Stock Exchange under
the symbol "LU." On July 27, 2000, the last sale price of Lucent's common stock
as reported on the New York Stock Exchange was $47 1/16.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this prospectus is
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TABLE OF CONTENTS
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Page
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WHERE YOU CAN FIND MORE INFORMATION............................................. 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE................................. 3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS............................... 5
THE COMPANY..................................................................... 5
SELLING SECURITYHOLDERS......................................................... 6
PLAN OF DISTRIBUTION............................................................ 10
USE OF PROCEEDS................................................................. 13
LEGAL MATTERS................................................................... 13
EXPERTS ........................................................................ 13
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WHERE YOU CAN FIND MORE INFORMATION
Lucent files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission. You may read
and copy any reports, statements or other information that Lucent files with the
Securities and Exchange Commission at the Securities and Exchange Commission's
public reference room at the following location:
PUBLIC REFERENCE ROOM
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
Please call the Securities and Exchange Commission at 1-800-SEC-0330
for information on the operations of the public reference room. These
Securities and Exchange Commission filings are also available to the public from
commercial document retrieval services and at the Internet world wide web site
maintained by the Securities and Exchange Commission at "http://www.sec.gov."
Lucent filed a registration statement on Form S-3 with the Securities
and Exchange Commission to register the Lucent common stock to be sold by the
selling securityholders. This prospectus is a part of that registration
statement. As allowed by Securities and Exchange Commission rules, this
prospectus does not contain all the information you can find in Lucent's
registration statement or the exhibits to the registration statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows Lucent to "incorporate by
reference" information into this prospectus, which means that Lucent can
disclose important information to you by referring you to other documents filed
separately with the Securities and Exchange Commission. The information
incorporated by reference is considered part of this prospectus, except for any
information superseded by information contained directly in this prospectus or
in later filed documents incorporated by reference in this prospectus.
This prospectus incorporates by reference the documents set forth below
that Lucent has previously filed with the Securities and Exchange Commission.
These documents contain important business and financial information about
Lucent that is not included in or delivered with this prospectus.
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LUCENT SEC FILINGS (FILE NO. 1-11639) PERIOD
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1. Annual Report on Form 10-K Fiscal Year ended September 30, 1999, as amended by
Form 8-K filed on February 11, 2000
2. Quarterly Reports on Form 10-Q Quarters ended December 31, 1999 and March 31, 2000
3. Current Reports on Form 8-K Filed October 29, 1999, November 19, 1999,
January 7, 2000, February 11, 2000, March 1,
2000, March 10, 2000, May 5, 2000, July 20, 2000
and July 28, 2000
4. The description of Lucent common stock and Lucent Filed under Section 12 of the Securities Exchange Act
rights to acquire junior preferred stock set forth in of 1934 on February 26, 1996, as amended by Amendment
the Lucent registration statement on Form 10 No. 1 filed on Form 10/A on March 12, 1996, Amendment
No. 2 filed on March 22, 1996 and Amendment No. 3
filed on Form 10/A on April 1, 1996, including any
amendments or reports filed for the purpose of
updating such descriptions.
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Lucent also incorporates by reference additional documents that may be
filed with the Securities and Exchange Commission under Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act after the date of this prospectus and
prior to the time all of the securities offered by this prospectus are sold.
These include periodic reports, such as Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, as well as proxy
statements.
If you are a Lucent stockholder, we may have sent you some of the
documents incorporated by reference, but you can obtain any of them through
Lucent, the Securities and Exchange Commission or the Securities and Exchange
Commission's Internet web site as described above. Documents incorporated by
reference are available from Lucent without charge, excluding all exhibits,
except that if Lucent has specifically incorporated by reference an exhibit in
this prospectus, the exhibit will also be provided without charge. You may
obtain documents incorporated by reference in this prospectus by requesting them
in writing or by telephone from Lucent at the following address:
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Lucent Technologies
c/o The Bank of New York
Church Street Station
P.O. Box 11009
New York, New York 10286-1009
Telephone: 1-888-LUCENT6
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information that is different from what is contained in this prospectus. This
prospectus is dated , 2000. You should not assume that the information
contained in this prospectus is accurate as of any date other than that date.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents we incorporate by reference may
contain certain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Statements in this prospectus that are
not historical facts are hereby identified as "forward-looking statements" for
the purpose of the safe harbor provided by Section 21E of the Securities
Exchange Act and Section 27A of the Securities Act. Words such as "estimate,"
"project," "plan," "intend," "expect," "believe" and similar expressions are
intended to identify forward-looking statements. These forward-looking
statements are found at various places throughout this prospectus and the other
documents incorporated by reference, including, but not limited to, Lucent's
Annual Report on Form 10-K for the year ended September 30, 1999, including any
amendments. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this prospectus.
Lucent does not undertake any obligation to publicly update or release any
revisions to these forward-looking statements to reflect events or circumstances
after the date of this prospectus or to reflect the occurrence of unanticipated
events.
THE COMPANY
Lucent designs, builds and delivers a wide range of public and private
networks, communications systems and software, data networking systems, business
telephone systems and microelectronic components. Lucent is a global leader in
the sale of public communications systems, and is a supplier of systems or
software to most of the world's largest network operators. Lucent is also a
global leader in the sale of business communications systems and in the sale of
microelectronic components for communications applications to manufacturers of
communications systems and computers. Lucent conducts its research and
development activities through Bell Laboratories, one of the world's foremost
industrial research and development organizations.
Lucent was incorporated in Delaware in November 1995. Lucent was a
wholly owned subsidiary of AT&T prior to its initial public offering of common
stock on April 10, 1996, and
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became completely separate from AT&T when the remaining shares of Lucent common
stock held by AT&T were distributed to AT&T's stockholders on September 30,
1996.
On March 1, 2000 Lucent announced a plan to spin off its PBX,
SYSTIMAX(R) structured cabling and LAN-based data businesses to its
stockholders, forming a separate company named Avaya Inc. that will focus
directly and independently on the enterprise networking market. The spin-off is
expected to be accomplished through a tax-free distribution of shares to
Lucent's stockholders to be completed by the end of the fourth quarter of fiscal
2000, which ends on September 30.
On July 20, 2000, Lucent announced plans to spin off its
microelectronics business, which includes the optoelectronics components and
integrated circuits divisions, in a separate, new company to be named later. An
initial public offering is planned for up to 20 percent of the new company in
the first calendar quarter of 2001, with the remaining shares of the new company
expected to be spun off in a tax-free distribution by the summer of 2001. Lucent
intends to seek a ruling from the Internal Revenue Service with respect to the
tax-free treatment of the distribution. The distribution is subject to certain
conditions, including obtaining a favorable tax ruling.
The new company will include Lucent's microelectronics business which
makes silicon chips and optoelectronic components, such as lasers, that are the
building blocks for communications systems ranging from wireless phones and
modems to Internet equipment and optical networking systems.
The principal executive offices of Lucent are located at 600 Mountain
Avenue, Murray Hill, New Jersey 07974 and its telephone number at that location
is (908) 582-8500.
SELLING SECURITYHOLDERS
The following table sets forth (1) the number of shares of Lucent
common stock owned by each of the selling securityholders as of July 28, 2000;
(2) the percentage of outstanding shares of Lucent common stock represented by
that number of shares; and (3) the number of shares of Lucent common stock
registered for sale hereby. No estimate can be given as to the amount of shares
that will be held by the selling securityholders after completion of this
offering because the selling securityholders may offer all or some of the shares
and because there currently are no agreements, arrangements or understandings
with respect to the sale of any of the shares. The shares offered by this
prospectus may be offered from time to time by the selling securityholders named
below.
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SHARES PERCENTAGE OF NUMBER OF SHARES
BENEFICIALLY OUTSTANDING SHARES REGISTERED FOR SALE
SELLING SECURITYHOLDER(1) OWNED(2) OWNED HEREBY(3)
------------------------- --------- ----- ----------
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Access Technology Partners, L.P. 902,568 * 902,568
Access Technology Partners Brokers Fund, L.P. 18,052 * 18,052
ACE Investment Partnership 124,899 * 124,899
Leni A. Alonzo 3,020 * 3,020
AnnEm Investments, Ltd. 588,533 * 588,533
Anschutz Family Investment Company 2,143,603 * 2,143,603
Antec Corp. 120,809 * 120,809
Ardent Research Partners, L.P. 127,431 * 127,431
Ardent Research Partners Ltd. 42,477 * 42,477
Jonathan Art 3,020 * 3,020
Brian Attard 382,294 * 382,294
BABP, LLC 67,266 * 67,266
The Barron Family Trust 2,230,053 * 2,230,053
Bell Atlantic NSI Holdings, Inc. 453,040 * 453,040
Jonathan Bilzin 13,045 * 13,045
Bondurant Investors 106,193 * 106,193
Frank Bonsal 56,409 * 56,409
George Boutros 12,683 * 12,683
CB Capital Investors LLC 1,692,317 * 1,692,317
Chromatis Investors 15,099 * 15,099
Alexander Cohen 28,204 * 28,204
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Communications Ventures II, L.P. 8,667,205 * 8,667,205
Communications Ventures Affiliates Fund II, L.P. 710,707 * 710,707
Crosspoint Venture Partners 1997 8,194,060 * 8,194,060
CTI Capital Corp. 282,054 * 282,054
L. Kevin Dann 65,225 * 65,225
Ronald Drake 7,093 * 6,523
Stanley Druckenmiller 219,483 * 219,483
Frank Dzubek 42,477 * 42,477
Mory Ejabat 284,101 * 276,101
Mory Ejabat Trust 564,105 * 564,105
Stuart Elby 3,020 * 3,020
Emerging Market Ventures LP 169,908 * 169,908
Eucalyptus Ventures L.P. (Delaware) 1,546,093 * 1,546,093
Eucalyptus Ventures (Cayman) L.P. 46,707 * 46,707
Eucalyptus Ventures L.P. (Israel) 77,673 * 77,673
Eucalyptus Ventures Affiliate Fund L.P. 21,841 * 21,841
Daniel Eule 13,045 * 13,045
Fidelity Mt. Vernon Street Trust: Fidelity 197,549 * 197,549
Aggressive Growth Fund
Fidelity Hastins Street Trust: Fidelity Fund 170,334 * 170,334
Fidelity Securities Fund: Fidelity OTC Portfolio 138,476 * 138,476
Fidelity Capital Trust: Fidelity Capital 38,654 * 38,654
Appreciation Fund
Fidelity Financial Trust: Fidelity Convertible 17,628 * 17,628
Securities Fund
Fidelity Hastings Street Trust: Fidelity 15,717 * 15,717
Contrafund II
Fidelity Advisor Series I: Fidelity Advisor 14,867 * 14,867
Small Cap Fund
Fidelity Commonwealth Trust: Fidelity Small Cap 10,832 * 10,832
Stock Fund
G&H Partners 67,963 * 67,963
Anthony Gallagher 3,261 * 3,261
Gallagher PR 14,102 * 14,102
Kevin Gallagher 14,102 * 14,102
John Gault 54,557 * 12,080
Uri Ghera 3,020 * 3,020
Rafi Gidron(4) 6,371,580 * 6,371,580
Gary Gladstein 130,450 * 130,450
Jason Greenberg 9,682 * 9,682
H&Q Chromatis Networks Investors, LLC 94,770 * 94,770
Steven Haggerty 12,080 * 12,080
Hambrecht & Quist California 56,409 * 56,409
Hambrecht & Quist Employee Venture Fund, L.P. II 56,409 * 56,409
Todd Hanson 12,480 * 12,480
Cannon Y. Harvey 69,679 * 54,364
Robert Hawk(5) 286,147 * 286,147
Duncan Hennes 19,567 * 19,567
Herrmann Holdings, Ltd. 5,296,347 * 5,296,347
Herrmann Technology Trust 885,318 * 885,318
Hilstam B.V.(6) 6,371,580 * 6,371,580
Brian Host 1,811 * 1,811
Inbal & Gil 3 Ltd. 141,589 * 141,589
International Capital Holdings LLC 6,040 * 6,040
Steve Jacobsen 60,404 * 60,404
Jerusalem Venture Partners L.P. 9,271,485 * 9,271,485
Jerusalem Venture Partners (Israel) L.P. 964,759 * 964,759
Jerusalem Venture Partners III L.P. 1,844,712 * 1,844,712
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Jerusalem Venture Partners III (Israel) L.P. 51,665 * 51,665
Jerusalem Venture Partners III Entrepreneur 141,754 * 141,754
Fund L.P.
Rodney Jones 32,612 * 32,612
Sheldon Kasowitz 39,135 * 39,135
Gerald Kerner 16,306 * 16,306
Konus Investments Ltd. 2,417 * 2,417
Steve Korn 1,061,930 * 1,061,930
David Kowitz 65,225 * 65,225
Edward Lu 6,040 * 6,040
Lucent Venture Partners I LLC 1,139,786 * 1,139,786
John McEvoy 65,225 * 65,225
Chris Michalik 19,567 * 19,567
Molly Miller 14,102 * 14,102
MKG-SBC Investments (Israel) Ltd. 102,688 * 102,688
Afshim Mohebbi 12,080 * 12,080
Morgan Stanley Dean Witter Equity Funding LLC 241,620 * 241,620
Jay Morrison 67,963 * 67,963
Neal Moszkowski 16,306 * 16,306
Gavin Murphy 6,523 * 6,523
Joe Nacchio 65,112 * 60,404
Michael Neus 10,761 * 10,761
Oren Holdings Ltd. 2,123,860 * 2,123,860
Michael Pendy 7,827 * 7,827
Mike Perusse 3,020 * 3,020
Doug Place 30,201 * 30,201
Michael Pruzan 16,318 * 16,306
QIP Investment Holdings LDC 4,230,792 * 4,230,792
Colin Raymond 3,261 * 3,261
Doug Reid 6,523 * 6,523
Steve Roberts 769,899 * 769,899
Dave Schaeffer 30,201 * 30,201
SFM Domestic Investments LLC 153,102 * 153,102
Denise Shen 6,040 * 6,040
Shikma Anefa Ltd. 9,666 * 9,666
Shussman Holdings Ltd. 1,061,930 * 1,061,930
Frank Sica 65,225 * 65,225
Semir Sirazi 272,278 * 272,278
Craig Slater 88,234 * 54,364
Jeffrey Soros 1999 Perpetuities Trust 26,090 * 26,090
Peter Soros 1999 Perpetuities Trust 26,090 * 26,090
Ramez Sousou 32,612 * 32,612
Peter Streinger 13,045 * 13,045
Summit Capital Group 60,404 * 60,404
Andrew Switajewski 16,306 * 16,306
Drake Tempest 60,404 * 60,404
Tulchinsky Stern Properties (1996) Ltd. 70,796 * 70,796
U.S. Bancorp Piper Jaffray ECM Fund I, LLC 105,710 * 105,710
U.S. Telesource, Inc.(7) 1,303,871 * 1,303,871
Sean Warren 6,523 * 6,523
David Wassong 13,045 * 13,045
Lew Wilks 60,404 * 60,404
Jeffrey Wilensky 42,477 * 42,477
Robert Woodruff 60,404 * 60,404
Other former Chromatis stockholders(8) 2,193,451 * 2,193,280
</TABLE>
(1) The selling securityholders have sole voting and investment power with
respect to all shares of Lucent common stock shown as beneficially
owned by them, subject to community property laws, where applicable.
(2) 677,019 shares issued to Herrmann Holdings, Ltd., AnnEm Investments,
Ltd. and Herrmann Technology Trust in connection with the acquisition
of Herrmann Technology are being held in escrow to satisfy certain
indemnification obligations of these selling securityholders as well as
certain commercial conditions. To the extent any of the shares held in
escrow are returned to Lucent in satisfaction of the indemnification
obligations or because the commercial conditions have not been
satisfied, the total number of shares beneficially owned by these
selling securityholders would be reduced according to their respective
pro rata interests in the shares held in escrow that are returned to
Lucent.
7,206,651 shares issued to the other selling securityholders in
connection with the acquisition of Chromatis are being held in escrow
until June 28, 2001 to satisfy certain indemnification obligations of
these other selling securityholders. To the extent any of the shares
held in escrow are returned to Lucent in satisfaction of such
indemnification obligations of these other selling securityholders, the
total number of shares beneficially owned by these other selling
securityholders would be reduced according to their respective pro rata
interests in the shares held in escrow that are returned to Lucent.
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(3) This registration statement also covers any additional shares of common
stock which become issuable in connection with the shares registered
for sale hereby by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
receipt of consideration which results in an increase in the number of
Lucent's outstanding shares of common stock.
(4) 637,158 shares issued to Rafi Gidron in connection with the acquisition
of Chromatis, in addition to the shares deposited in escrow by Mr.
Gidron under the arrangement described in note 2, are being held in
escrow until certain commercial conditions are satisfied. If and to the
extent any of the shares held in escrow are returned to Lucent in case
such commercial conditions are not satisfied, the total number of
shares beneficially owned by Rafi Gidron would be reduced accordingly.
(5) Includes 4,247 shares registered in the name of Michael Hawk, 2,123
shares registered in the name of Sharon von Alstine, 2,123 shares
registered in the name of Connie Williams, 4,247 shares registered in
the name of Christopher Hawk, 4,247 shares registered in the name of
Stephanie Hawk and 4,247 shares registered in the name of R. Casey
Hawk.
(6) 637,158 shares issued to Hilstam B.V. in connection with the
acquisition of Chromatis, in addition to the shares deposited in escrow
by Hilstam B.V. under the arrangement described in note 2, in
connection with the acquisition of Chromatis are being held in escrow
until certain commercial conditions are satisfied. If and to the extent
any of the shares held in escrow are returned to Lucent in case such
commercial conditions are not satisfied, the total number of shares
beneficially owned by Hilstam B.V. would be reduced accordingly.
(7) 547,626 shares issued to U.S. Telesource, Inc. in connection with the
acquisition of Chromatis, in addition to the shares deposited in escrow
by U.S. Telesource, Inc. under the arrangement described in note 2, are
being held in escrow until certain commercial conditions are satisfied.
If and to the extent any of the shares held in escrow are returned to
Lucent in case such commercial conditions are not satisfied, the total
number of shares beneficially owned by U.S. Telesource, Inc. would be
reduced accordingly.
(8) These stockholders, individually and in the aggregate, own less than
0.1% of Lucent's outstanding common stock.
* Represents beneficial ownership of less than 1% of the outstanding
shares of Lucent after completion of the offering.
Each of Herrmann Holdings, Ltd., AnnEm Investments, Ltd. and Herrmann
Technology Trust was a securityholder of Herrmann Technology immediately prior
to Lucent's acquisition of Herrmann Technology. Each of the other selling
securityholders was a securityholder of Chromatis immediately prior to Lucent's
acquisition of Chromatis. None of the selling securityholders were officers or
directors of Herrmann Technology prior to Lucent's acquisition of Herrmann
Technology; however, William C. Herrmann Jr., the President of the managing
general partner of each of Herrmann Holdings, Ltd. and AnnEm Investments, Ltd.
was the President and CEO of Herrmann Technology and Linda Hart Herrmann, the
Trustee of the Herrmann Technology Trust, was the Secretary of Herrmann
Technology.
Rafi Gidron was Co-President and Co-Chairman of Chromatis; Orni
Petruschka, the beneficial owner of Hilstam B.V., was Co-President and
Co-Chairman of the Board of
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Chromatis; Yair Oren, the beneficial owner of Oren Holdings Ltd., was Chief
Technical Officer of Chromatis; Yossi Shussman, the beneficial owner of Shussman
Holdings Ltd., was Vice President -- Research and Development of Chromatis;
Steve Korn was Vice President -- Marketing and Business Development of
Chromatis; Brian Attard was Vice President -- Operations of Chromatis; Robert
Barron was Chief Executive Officer of Chromatis, and Steve Roberts was Vice
President -- Sales of Chromatis. Doran Stern, beneficial owner of Inbal & Gil 3
Ltd., served as Secretary of Chromatis. Erel Margalit served as a director of
Chromatis on behalf of Jerusalem Venture Partners L.P., Jerusalem Venture
Partners (Israel) L.P., Jerusalem Venture Partners III L.P., Jerusalem Venture
Partners III (Israel) L.P., and Jerusalem Venture Partners III Entrepreneur Fund
L.P. Roland Van der Meer, a member of ComVen II, LLC, the general partner of
Communications Ventures II, L.P. and Communications Ventures Affiliates Fund II,
L.P., served as a director of Chromatis. Seth Newman, a general partner of
Crosspoint Venture Partners 1997, served as a director of Chromatis. Aaron
Mankovsky served as a director of Chromatis on behalf of Eucalyptus Ventures
L.P. (Delaware), Eucalyptus Ventures (Cayman) Ltd., Eucalyptus Ventures L.P.
(Israel) and Eucalyptus Ventures Affiliate Fund L.P. Mory Ejabat served as a
consultant to Lucent from June 24, 1999 to February 15, 2000. Jeffrey Wilensky
was employed with Lucent from August 1996 to March 2000. Lucent Venture Partners
I LLC holds the shares listed in the table above for itself and a number of
other individuals other than Lucent. These individuals include John Hanley,
President of Lucent Venture Partners I LLC and an officer of Lucent, and
certain other employees of Lucent and its affiliates. None of the other selling
securityholders were officers or directors of Chromatis prior to Lucent's
acquisition of Chromatis and none of the selling securityholders are officers or
directors of Lucent.
Except as otherwise noted above, none of the selling securityholders
has had a material relationship with Lucent within the past three years other
than as a result of the ownership of the shares or other securities of Lucent.
PLAN OF DISTRIBUTION
RESALES BY SELLING SECURITYHOLDERS
Lucent is registering the shares on behalf of the selling
securityholders. Any or all of the selling securityholders may offer the shares
from time to time, either in increments or in a single transaction. The selling
securityholders may also decide not to sell all the shares they are allowed to
sell under this prospectus. The selling securityholders will act independently
of Lucent in making decisions with respect to the timing, manner and size of
each sale.
DONEES, PLEDGEES AND DISTRIBUTEES
The term "selling securityholders" includes donees, persons who receive
shares from the selling securityholders after the date of this prospectus by
gift. The term also includes pledgees, persons who, upon contractual default by
the selling securityholders, may seize shares which the selling securityholders
pledged to such persons. The term also includes distributees who receive shares
from a selling securityholder after the date of this prospectus as a
distribution to members or partners of the selling securityholder.
10
12
COSTS AND COMMISSIONS
Lucent will pay all costs, expenses and fees in connection with the
registration of the shares. The selling securityholders will pay all brokerage
commissions and similar selling expenses, if any, attributable to the sale of
shares.
TYPES OF SALE TRANSACTIONS
The selling securityholders will act independently of Lucent in making
decisions with respect to the timing, manner and size of each sale. The selling
securityholders may sell the shares in one or more types of transactions (which
may include block transactions):
- on the NYSE,
- in negotiated transactions,
- through the writing of options on shares,
- short sales, or
- any combination of such methods of sale.
The shares may be sold at a fixed offering price, which may be changed,
or at market prices prevailing at the time of sale, or at negotiated prices.
Such transactions may or may not involve brokers or dealers.
SALES TO OR THROUGH BROKER-DEALERS
The selling securityholders may either sell shares directly to
purchasers, or sell shares to, or through, broker-dealers. These broker-dealers
may act either as an agent of the selling securityholders, or as a principal for
the broker-dealer's own account. Such broker-dealers may receive compensation in
the form of discounts, concessions or commissions from the selling
securityholders and/or the purchasers of shares. This compensation may be
received both if the broker-dealer acts as an agent or as a principal. This
compensation might also exceed customary commissions.
The selling securityholders may enter into hedging transactions with
broker-dealers in connection with distributions of the shares or otherwise. In
such transactions, broker-dealers may engage in short sales of the shares in the
course of hedging the positions they assume with selling securityholders. The
selling securityholders also may sell shares short and re-deliver the shares to
close out such short positions. The selling securityholders may enter into
option or other transactions with broker-dealers which require the delivery to
the broker-dealer of the shares. The broker-dealer may then resell or otherwise
transfer such shares pursuant to this prospectus. The selling securityholders
also may loan or pledge the shares to a broker-dealer. The broker-dealer may
sell the shares so loaned, or upon a default the broker-dealer may sell the
pledged shares pursuant to this prospectus.
11
13
DEEMED UNDERWRITING COMPENSATION
The selling securityholders and any broker-dealers that act in
connection with the sale of shares might be deemed to be "underwriters" within
the meaning of Section 2(a)(11) of the Securities Act. Any commissions received
by such broker-dealers, and any profit on the resale of shares sold by them
while acting as principals, could be deemed to be underwriting discounts or
commissions under the Securities Act.
INDEMNIFICATION
The selling securityholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of shares
against certain liabilities, including liabilities arising under the Securities
Act.
PROSPECTUS DELIVERY REQUIREMENTS
Because a selling securityholder may be deemed an underwriter, the
selling securityholder must deliver this prospectus and any supplements to this
prospectus in the manner required by the Securities Act. This might include
delivery through the facilities of the NYSE in accordance with Rule 153 under
the Securities Act.
SALES UNDER RULE 144
The selling securityholders may also resell all or a portion of the
shares in open market transactions in reliance upon Rule 144 under the
Securities Act. To do so, the selling securityholders must meet the criteria and
comply with the requirements of Rule 144.
DISTRIBUTION ARRANGEMENTS WITH BROKER-DEALERS
If the selling securityholders notify Lucent that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through:
- a block trade,
- special offering,
- exchange distribution or secondary distribution, or
- a purchase by a broker or dealer,
then Lucent will file, if required, a supplement to this prospectus under Rule
424(b) under the Securities Act.
The supplement will disclose, to the extent required:
- the name of such selling securityholder and of the
participating broker-dealer(s),
- the number of shares involved,
- the price at which such shares were sold,
12
14
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable,
- that such broker-dealer(s) did not conduct any investigation to
verify the information set out or incorporated by reference in this
prospectus, and any other facts material to the transaction.
USE OF PROCEEDS
Lucent will not receive any proceeds from the sale of the shares by the
selling securityholders.
LEGAL MATTERS
The legality of Lucent common stock offered by this prospectus will be
passed upon for Lucent by Jean F. Rankin, Vice President--Law, of Lucent. As of
July 28, 2000 Jean F. Rankin owned 121 shares of Lucent common stock and
options and stock units for 145,200 shares of Lucent common stock.
EXPERTS
The financial statements incorporated in this prospectus by reference
in Exhibit 99.1 to Lucent's Current Report on Form 8-K dated February 11, 2000,
have been so incorporated in reliance on the report of PricewaterhouseCoopers
LLP, independent accountants, given on the authority of said firm as experts in
auditing and accounting.
13
15
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection
with the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fees and the New York
Stock Exchange listing fee.
<TABLE>
<CAPTION>
To be Paid By the
registrant
----------------------
<S> <C>
SEC Registration Fee $ 991,567
Accounting fees and expenses 10,000
Legal fees and expenses 10,000
Miscellaneous 433
----------
Total $1,012,000
</TABLE>
Lucent will pay all expenses of registration, issuance and distribution
of the shares being sold by the selling securityholders, excluding fees and
expenses of counsel to the selling securityholders and any underwriting
commissions and discounts, filing fees and transfer or other taxes, which shall
be borne by the selling securityholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The registrant's Certificate of Incorporation provides that a director
of the registrant shall not be personally liable to the registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except, if required by the Delaware General Corporation Law, for liability (1)
for any breach of the director's duty of loyalty to the registrant or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) under Section 174 of
the Delaware General Corporation Law, which concerns unlawful payments of
dividends, stock purchases or redemptions or (4) for any transaction from which
the director derived an improper personal benefit. Neither the amendment nor
repeal of such provision shall eliminate or reduce the effect of such provision
in respect of any matter occurring, or any cause of action, suit or claim that,
but for such provision, would accrue or arise prior to such amendment or repeal.
While the registrant's Certificate of Incorporation provides directors
with protection from awards for monetary damages for breach of their duty of
care, it does not eliminate such duty. Accordingly, the registrant's Certificate
of Incorporation will have no effect on the availability of equitable remedies
such as an injunction or rescission based on a director's breach of his or her
duty of care.
II-1
16
The registrant's Certificate of Incorporation provides that each person
who was or is made a party to or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that such person, or a person of whom such person is the legal
representative, is or was a director or officer of the registrant or is or was
serving at the request of the registrant as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the registrant to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
registrant to provide broader indemnification rights than said law permitted the
registrant to provide prior to such amendment), against all expense, liability
and loss reasonably incurred or suffered by such person in connection therewith.
Such right to indemnification includes the right to have the registrant pay the
expenses incurred in defending any such proceeding in advance of its final
disposition, subject to the provisions of the Delaware General Corporation Law.
Such rights are not exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the registrant's Certificate
of Incorporation or By-laws, agreement, vote of stockholders or disinterested
directors or otherwise. No repeal or modification of such provision will in any
way diminish or adversely affect the rights of any director, officer, employee
or agent of the registrant thereunder in respect of any occurrence or matter
arising prior to any such repeal or modification.
The registrant's Certificate of Incorporation also specifically
authorizes the registrant to maintain insurance and to grant similar
indemnification rights to employees or agents of the registrant. The directors
and officers of the registrant are covered by insurance policies indemnifying
them against certain liabilities, including certain liabilities arising under
the Securities Act, which might be incurred by them in such capacities.
ITEM 16. EXHIBITS.
See index to exhibits.
ITEM 17. UNDERTAKINGS.
A. The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which,
II-2
17
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission under Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the registrant
pursuant to section 13 or section 15(d) of the Securities Exchange Act that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
18
D. The undersigned registrant hereby undertakes that:
(1) For the purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Murray Hill, State of New Jersey on July 28, 2000.
LUCENT TECHNOLOGIES INC.
By: /s/ James S. Lusk
---------------------------------------
Name: James S. Lusk
Title: Senior Vice President and
Controller
Pursuant to the requirements of the Securities Act of 1933, this
registration statement or amendment thereto has been signed by the following
persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER: ###
#
Richard A. McGinn Chairman of the Board and Chief #
Executive Officer #
#
PRINCIPAL FINANCIAL OFFICER: #
#
Deborah C. Hopkins Executive Vice President and ####By: /s/ James S. Lusk
Chief Financial Officer -----------------------
# (James S. Lusk,
attorney-in-fact)*
PRINCIPAL ACCOUNTING OFFICER:
#
James S. Lusk Senior Vice President and Controller #
#
#
#
DIRECTORS: #* by power of attorney
Paul A. Allaire #
Betsy S. Atkins # Date: July 28, 2000
Carla A. Hills #
Richard A. McGinn #
Paul H. O'Neill #
Henry B. Schacht #
Franklin A. Thomas #
John A. Young #
</TABLE>
II-5
20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
DESCRIPTION
<S> <C>
2.1 Agreement and Plan of Merger, dated as of May 31, 2000, among Lucent, Goldfish Acquisition Inc., and
Chromatis Networks Inc.
2.2 Agreement and Plan of Merger, dated as of June 16, 2000, among Lucent, Kosu Acquisition Inc., Herrmann
Technology, Inc., Herrmann Holdings, Ltd. AnnEm Investments, Ltd. and Herrmann Technology Trust.
4.1* Provisions of the Certificate of Incorporation of the registrant, as amended effective February 16, 2000,
that define the rights of security holders of the registrant (incorporated by reference to Exhibit (3)(i) to
Registration Statement (No. 333-31400) on Form S-4.
4.2* Provisions of the By-Laws of the registrant, as amended
effective February 17, 1999, that define the rights of security
holders of the registrant (incorporated by reference to Exhibit
(3)(ii) to the registrant's Annual Report on Form 10-K for the
year ended September 30, 1999).
4.3* Rights Agreement between the registrant and The Bank of New York (successor to First Chicago Trust Company of
New York), as rights agent, dated as of April 4, 1996 (incorporated by reference to Exhibit 4.2 to
Registration Statement (No. 333-00703) on Form S-1).
4.4* Amendment to Rights Agreement between the registrant and The
Bank of New York (successor to First Chicago Trust Company of
New York), dated as of February 18, 1998 (incorporated by
reference to Exhibit (10)(i)5 to the registrant's Annual Report
on Form 10-K for the period ended September 30, 1998).
5.1 Opinion of Jean F. Rankin, Vice President -- Law of the registrant, as to the legality of the securities to
be issued.
23.1 Consent of Jean F. Rankin is contained in the opinion of counsel filed as Exhibit 5.1.
23.2 Consent of PricewaterhouseCoopers LLP.
24.1 Powers of Attorney executed by officers and directors who signed this registration statement.
* Incorporated herein by reference.
</TABLE>
II-6
1
Exhibit 2.1
EXECUTION COPY
-----------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LUCENT TECHNOLOGIES INC.,
GOLDFISH ACQUISITION INC.
AND
CHROMATIS NETWORKS INC.
-------------------------------------------
Dated as of May 31, 2000
-------------------------------------------
2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. The Merger.............................................................................................. 2
1.1 General............................................................................................ 2
1.2 Certificate of Incorporation....................................................................... 2
1.3 By-Laws............................................................................................ 3
1.4 Directors and Officers............................................................................. 3
1.5 Conversion of Securities........................................................................... 3
1.6 Adjustment of the Exchange Ratios.................................................................. 4
1.7 Dissenting Shares.................................................................................. 4
1.8 No Fractional Shares............................................................................... 4
1.9 Exchange Procedures; Distributions with Respect to Unexchanged Shares; Stock Transfer Books........ 5
1.10 Return of Exchange Fund............................................................................ 7
1.11 No Further Ownership Rights in Company Capital Stock............................................... 7
1.12 Further Assurances................................................................................. 7
2. Approval by Stockholders................................................................................ 8
2.1 Approval by Stockholders........................................................................... 8
3. Representations and Warranties of the Company........................................................... 8
3.1 Organization....................................................................................... 8
3.2 Capitalization; Options and Other Rights........................................................... 8
3.3 Authority; Stockholder Vote........................................................................ 10
3.4 Charter Documents.................................................................................. 11
3.5 Financial Statements............................................................................... 11
3.6 Absence of Undisclosed Liabilities; Indebtedness................................................... 12
3.7 Operations and Obligations......................................................................... 12
3.8 Properties......................................................................................... 14
3.9 Inventory.......................................................................................... 14
3.10 Contracts.......................................................................................... 14
3.11 Absence of Default................................................................................. 15
3.12 Litigation......................................................................................... 16
3.13 Compliance with Law................................................................................ 16
3.14 Intellectual Property; Year 2000................................................................... 16
3.15 Tax Matters........................................................................................ 18
3.16 Employee Benefit Plans............................................................................. 19
3.17 Executive Employees................................................................................ 20
3.18 Employees.......................................................................................... 21
3.19 Environmental Laws................................................................................. 22
3.20 Bank Accounts, Letters of Credit and Powers of Attorney............................................ 22
</TABLE>
i
3
<TABLE>
<S> <C>
3.21 Subsidiaries....................................................................................... 23
3.22 Affiliate Transactions............................................................................. 23
3.23 Insurance.......................................................................................... 23
3.24 Leases............................................................................................. 24
3.25 Assets............................................................................................. 24
3.26 Government Grant Programs.......................................................................... 24
3.27 Minute Books....................................................................................... 24
3.28 Complete Copies of Materials....................................................................... 25
3.29 Disclosure......................................................................................... 25
3.30 Reorganization..................................................................................... 25
3.31 Export Control Laws................................................................................ 25
4. Representations and Warranties of Acquisition and Lucent................................................ 25
4.1 Organization....................................................................................... 25
4.2 Capital Structure.................................................................................. 26
4.3 Authority.......................................................................................... 26
4.4 Litigation......................................................................................... 27
4.5 SEC Documents; Undisclosed Liabilities............................................................. 27
4.6 Information Supplied............................................................................... 28
4.7 Absence of Certain Changes......................................................................... 28
4.8 Interim Operations of Acquisition.................................................................. 29
4.9 Reorganization..................................................................................... 29
5. Conduct Pending Closing................................................................................. 29
5.1 Conduct of Business Pending Closing................................................................ 29
5.2 Prohibited Actions Pending Closing................................................................. 29
5.3 Access; Documents; Supplemental Information........................................................ 31
5.4 No Solicitation.................................................................................... 32
5.5 Exemption from Registration; Other Actions......................................................... 33
5.6 Company Stock Options; Warrant..................................................................... 34
5.7 Company Stock Plan................................................................................. 36
5.8 Employee Benefit Plans; Existing Agreement......................................................... 37
5.9 Indemnification.................................................................................... 37
5.10 Stock Exchange Listing............................................................................. 37
5.11 Affiliates......................................................................................... 38
5.12 Notification of Certain Matters.................................................................... 38
5.13 Tax Returns; Cooperation........................................................................... 38
5.14 Reorganization..................................................................................... 38
5.15 Actions by the Parties............................................................................. 38
5.16 CN Ltd............................................................................................. 39
6. Conditions Precedent.................................................................................... 39
6.1 Conditions Precedent to Each Party's Obligation to Effect the Merger............................... 39
6.2 Conditions Precedent to Obligations of Acquisition and Lucent...................................... 40
</TABLE>
ii
4
<TABLE>
<S> <C>
6.3 Conditions Precedent to the Company's Obligations.................................................. 41
6.4 Frustration of Closing Conditions.................................................................. 42
7. Survival of Representation and Warranties............................................................... 42
7.1 Representations and Warranties..................................................................... 42
8. Indemnification......................................................................................... 42
8.1 Escrow Shares...................................................................................... 43
8.2 General Indemnification............................................................................ 43
8.3 Damages Threshold; Damages Cap..................................................................... 43
8.4 Escrow Period; Release of Escrow Fund.............................................................. 44
8.5 Claims Upon Escrow Fund............................................................................ 44
8.6 Objections to Claims............................................................................... 44
8.7 Third-Party Claims................................................................................. 45
8.8 Company Stockholders' Representative............................................................... 45
9. Brokers' and Finders' Fees.............................................................................. 46
9.1 Company............................................................................................ 46
9.2 Acquisition and Lucent............................................................................. 46
10. Expenses; Taxes......................................................................................... 47
11. Press Releases.......................................................................................... 47
12. Contents of Agreement; Parties in Interest; etc......................................................... 47
13. Assignment and Binding Effect........................................................................... 47
14. Termination............................................................................................. 47
15. Definitions............................................................................................. 48
16. Notices................................................................................................. 52
17. Amendment............................................................................................... 53
18. Governing Law........................................................................................... 53
</TABLE>
iii
5
<TABLE>
<S> <C>
19. No Benefit to Others.................................................................................... 53
20. Severability............................................................................................ 53
21. Section Headings........................................................................................ 53
22. Schedules and Exhibits.................................................................................. 53
23. Extensions.............................................................................................. 53
24. Counterparts............................................................................................ 54
</TABLE>
iv
6
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER ("Agreement") dated as of May 31, 2000 by
and among LUCENT TECHNOLOGIES INC., a Delaware corporation ("Lucent"), GOLDFISH
ACQUISITION INC., a Delaware corporation ("Acquisition"), and CHROMATIS NETWORKS
INC., a Delaware corporation (the "Company").
BACKGROUND
A. The Company is a Delaware corporation with its registered office
located at 15 East North Street, Dover, Delaware and has authorized 100,000,000
shares of common stock, par value $.0001 per share ("Company Common Stock"), of
which 319,000 shares have been designated non-voting Common A-1 Stock ("Common
A-1 Stock") and 930,000 shares have been designated Common C-1 Stock ("Common
C-1 Stock"), and 32,500,000 shares of preferred stock, $.0001 par value per
share, of which 8,781,000 shares have been designated Series A Preferred Stock
("Series A Preferred Stock"), 319,000 shares have been designated Series A-1
Preferred Stock ("Series A-1 Preferred Stock"), 5,500,000 shares have been
designated Series B Preferred Stock ("Series B Preferred Stock"), 9,970,000
shares have been designated Series C Preferred Stock ("Series C Preferred
Stock"), 930,000 shares have been designated Series C-1 Preferred Stock ("Series
C-1 Preferred Stock") and 7,000,000 shares have been designated Series D
Preferred Stock ("Series D Preferred Stock"; the Series A Preferred Stock,
Series A-1 Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series C-1 Preferred Stock and Series D Preferred Stock are collectively
referred to herein as the "Company Preferred Stock" and the Company Common Stock
and the Company Preferred Stock are collectively referred to herein as the
"Company Capital Stock")
B. The Company is engaged principally in the design, development,
production, marketing, distribution and servicing of optical network products
and beneficially owns all the issued ordinary shares of Chromatis Networks Ltd.,
a company organized under the laws of the State of Israel ("CN Ltd."). CN Ltd.
has its principal office at 21 Yegia Kapaim, Petach Tiqua 49513, Israel and is
engaged principally in the research and development of optical network products.
The activities of the Company and CN Ltd. are collectively referred to herein as
the "Business."
C. Lucent is a Delaware corporation with its registered office located
at 1013 Centre Road, Wilmington, Delaware.
D. Acquisition is a wholly-owned subsidiary of Lucent and was formed to
merge with and into the Company so that as a result of the merger the Company
will survive and become a wholly-owned subsidiary of Lucent. Acquisition is a
Delaware corporation with its registered office located at 1013 Centre Road,
Wilmington, Delaware, and has authorized an aggregate of 1,000 shares of common
stock, no par value per share ("Acquisition Common Stock").
E. The Board of Directors of each of Acquisition and the Company has
determined that this Agreement and the merger of Acquisition with and into the
Company (the "Merger") in
7
accordance with the provisions of the Delaware General Corporation Law, as
amended (the "DGCL"), and subject to the terms and conditions of this Agreement,
is advisable and in the best interests of Acquisition and the Company and their
respective stockholders.
F. The Board of Directors of each of Lucent, Acquisition and the
Company have approved this Agreement and the transactions contemplated hereby.
G. The parties intend that, for United States federal income tax
purposes, the Merger shall qualify as a reorganization within the meaning of
Section 368(a) of the Code and that this Agreement shall constitute a plan of
reorganization.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound do hereby agree
as follows:
1. The Merger
1.1 General.
(a) Upon the terms and subject to the conditions of this
Agreement and in accordance with the DGCL, at the Effective Time, (i)
Acquisition shall be merged with and into the Company, (ii) the separate
corporate existence of Acquisition shall cease and (iii) the Company shall be
the surviving corporation (the "Surviving Corporation") and shall continue its
corporate existence under the laws of the State of Delaware.
(b) The Merger shall become effective at the time of filing of
a certificate of merger, substantially in the form of Exhibit A attached hereto
(the "Certificate of Merger"), with the Secretary of State of the State of
Delaware in accordance with the provisions of Section 251 of the DGCL, or at
such later time as may be stated in the Certificate of Merger or such later date
as the parties may mutually agree (the "Effective Time"). Subject to the terms
and conditions of this Agreement, the Company and Acquisition shall duly execute
and file the Certificate of Merger with the Secretary of State of the State of
Delaware at the time of the Closing. The closing of the Merger (the "Closing")
shall take place at the offices of Sidley & Austin, 875 Third Avenue, New York,
New York at 10:00 a.m. two business days after the date on which the last of the
conditions set forth in Section 6 shall have been satisfied or waived, or on
such other date, time and place as the parties may mutually agree (the "Closing
Date").
(c) At the Effective Time, the effect of the Merger shall be
as provided in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and
Acquisition shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company and
Acquisition shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
1.2 Certificate of Incorporation. The Certificate of
Incorporation of Acquisition, as in effect immediately prior to the Effective
Time, shall be the Certificate of
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Incorporation of the Surviving Corporation until thereafter amended as provided
therein or by applicable law except that Article I of such Certificate of
Incorporation shall be amended to read as follows: "The name of the Corporation
is : Chromatis Networks Inc."
1.3 By-Laws. The By-laws of Acquisition, as in effect
immediately prior to the Effective Time, shall be the By-laws of the Surviving
Corporation until thereafter amended as provided therein or by applicable law.
1.4 Directors and Officers. From and after the Effective Time,
(a) the directors of Acquisition at the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and By-laws of the Surviving Corporation, and
(b) the officers of Acquisition at the Effective Time shall be the initial
officers of the Surviving Corporation, in each case, until their respective
successors are duly elected or appointed and qualified.
1.5 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Lucent, Acquisition, the
Company or the holders of any of the following securities:
(a) each issued and outstanding share of common stock of
Acquisition shall be converted into one validly issued, fully paid and
nonassessable share of common stock, no par value per share, of the Surviving
Corporation;
(b) each share of Company Capital Stock owned or held in
treasury by the Company and each share of Company Capital Stock owned by
Acquisition, Lucent or Lucent Venture Partners Inc. shall be canceled and
retired without any conversion thereof and no payment or distribution shall be
made with respect thereto; and
(c) subject to the provisions of Sections 1.6 and 1.8, each
share of Company Capital Stock issued and outstanding immediately prior to the
Effective Time (other than (i) shares canceled in accordance with Section 1.5(b)
and (ii) Dissenting Shares) shall be converted into 2.12386 (such number as
adjusted in accordance with Section 1.6 (the "Exchange Ratio")) of validly
issued, fully paid and nonassessable shares of Lucent Common Stock including the
corresponding percentage right (the "Right") to purchase shares of junior
preferred stock, par value $1.00 per share, pursuant to the Rights Agreement
dated as of April 4, 1996, as amended, between Lucent and The Bank of New York
(as successor to First Chicago Trust Company of New York), as Rights Agent;
provided, that in no event shall the aggregate number of shares of Lucent Common
Stock (as adjusted in accordance with Section 1.6) issued in connection with the
Merger exceed 82,177,298. All references in this Agreement to Lucent Common
Stock to be received in accordance with the Merger shall be deemed, from and
after the Effective Time, to include the Rights. As of the Effective Time, each
share of Company Capital Stock shall no longer be outstanding and shall
automatically be canceled and retired, and each holder of record of a
certificate representing any shares of Company Capital Stock shall cease to have
any rights with respect thereto other than (i) the right to receive shares of
Lucent Common Stock to be issued in consideration therefor upon the surrender of
such certificate, (ii) any dividends and
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other distributions in accordance with Section 1.9(c) and (iii) any cash,
without interest, to be paid in lieu of any fractional share of Lucent Common
Stock in accordance with Section 1.8.
1.6 Adjustment of the Exchange Ratios. In the event that,
prior to the Effective Time, any stock split, combination, reclassification or
stock dividend with respect to the Lucent Common Stock, any change or conversion
of Lucent Common Stock into other securities or any other dividend or
distribution with respect to the Lucent Common Stock (other than regular
quarterly dividends) should occur or, if a record date with respect to any of
the foregoing should occur, appropriate and proportionate adjustments shall be
made to each Exchange Ratio, and thereafter all references to an Exchange Ratio
shall be deemed to be to such Exchange Ratio as so adjusted.
1.7 Dissenting Shares. (a) Notwithstanding any provision of
this Agreement to the contrary, shares of Company Capital Stock that are
outstanding immediately prior to the Effective Time and which are held of record
by stockholders who shall not have voted in favor of the Merger or consented
thereto in writing and who shall have demanded properly in writing appraisal for
such shares in accordance with Section 262 of the DGCL (collectively, the
"Dissenting Shares") shall not be converted into or represent the right to
receive the consideration set forth in Section 1.5(c). Such stockholders shall
be entitled to receive such consideration as is determined to be due with
respect to such Dissenting Shares in accordance with the provisions of Section
262, except that all Dissenting Shares held by stockholders who shall have
failed to perfect or who effectively shall have withdrawn or lost their rights
to appraisal of such shares under Section 262 shall thereupon be deemed to have
been converted into and to have become exchangeable for, as of the Effective
Time, the right to receive the shares of Lucent Common Stock specified in
Section 1.5(c), without any interest thereon, upon surrender, in the manner
provided in Section 1.9, of the certificate or certificates that were formerly
evidenced by such Dissenting Shares less the number of shares of Lucent Common
Stock allocable to such stockholder that have been deposited in the Escrow Fund
in respect of Company Capital Stock pursuant to Sections 1.9(b) and 8.1.
(b) The Company shall give Lucent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to the DGCL and received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Lucent, make any payment with respect to any demands
for appraisal or offer to settle or settle any such demands.
1.8 No Fractional Shares. No certificates or scrip
representing fractional shares of Lucent Common Stock shall be issued upon the
surrender for exchange of Certificates and such fractional share shall not
entitle the record or beneficial owner thereof to vote or to any other rights as
a stockholder of Lucent. In lieu of receiving any such fractional share, the
stockholder shall receive cash (without interest) in an amount rounded to the
nearest whole cent, determined by multiplying (i) the per share closing price on
the New York Stock Exchange, Inc. (the "NYSE") of Lucent Common Stock (as
reported on the NYSE Composite Transactions Tape as such Tape is reported in the
Wall Street Journal or another recognized business publication) on the date
immediately preceding the date on which the Effective Time shall occur
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(or, if the Lucent Common Stock did not trade on the NYSE on such prior date,
the last day of trading in Lucent Common Stock on the NYSE prior to the
Effective Time) by (ii) the fraction of a share to which such holder would
otherwise be entitled. Lucent shall make available to the Exchange Agent the
cash necessary for this purpose.
1.9 Exchange Procedures; Distributions with Respect to
Unexchanged Shares; Stock Transfer Books. (a) As of the Effective Time, Lucent
shall deposit with the Exchange Agent for the benefit of the holders of shares
of Company Capital Stock, certificates representing shares of the Lucent Common
Stock to be issued pursuant to Section 1.5(c) in exchange for the shares of
Company Capital Stock less the number of shares of Lucent Common Stock to be
deposited in the Escrow Fund pursuant to Section 8.1. Such shares of Lucent
Common Stock, together with any dividends or distributions with respect thereto
pursuant to Sections 1.8 and 1.9(c), are referred to herein as the "Exchange
Fund".
(b) As soon as practicable after the Effective Time, Lucent
shall use its reasonable best efforts to cause the Exchange Agent to send to
each Person who was, at the Effective Time, a holder of record of certificates
which represented outstanding Company Capital Stock (the "Certificates") which
shares were converted into the right to receive Lucent Common Stock pursuant to
Section 1.5(c), a letter of transmittal which (i) shall specify that delivery
shall be effected and risk of loss and title to such Certificates shall pass,
only upon actual delivery thereof to the Exchange Agent and (ii) shall contain
instructions for use in effecting the surrender of the Certificates. Upon
surrender to the Exchange Agent of Certificates for cancellation, together with
such letter of transmittal duly executed and such other documents as the
Exchange Agent may reasonably require, such holder shall be entitled to receive
in exchange therefor (A) a certificate representing the number of whole shares
of Lucent Common Stock into which the Company Capital Stock represented by the
surrendered Certificate shall have been converted at the Effective Time less
such holder's pro rata portion of the number of shares of Lucent Common Stock to
be deposited in the Escrow Fund on such holder's behalf pursuant to Section 8.1,
(B) cash in lieu of any fractional share of Lucent Common Stock in accordance
with Section 1.8 and (C) certain dividends and distributions in accordance with
Section 1.9(c), and the Certificates so surrendered shall then be canceled.
Subject to Section 1.8 and Section 1.9(c), until surrendered as contemplated by
this Section 1.9(b), each Certificate from and after the Effective Time shall be
deemed to represent only the right to receive, upon such surrender, the number
of shares of Lucent Common Stock into which such Company Capital Stock shall
have been converted. As soon as practicable after the Effective Time, and
subject to and in accordance with the provisions of Section 8, Lucent shall
cause to be issued to the Escrow Agent certificates representing approximately
10% of the shares of Lucent Common Stock to be issued in exchange for the
Company Capital Stock, which shall be registered in the name of the Escrow Agent
as nominee for the holders of Certificates canceled pursuant to this Section
1.9. Such shares shall be beneficially owned by such holders, shall be held in
escrow and shall be available to compensate Lucent as provided in Section 8. To
the extent not used for such purpose, such shares shall be released, as provided
in Section 8. As soon as practicable after the Effective Time, Lucent shall
cause to be issued to the Supplemental Escrow Agent certificates representing
approximately 10% of the shares of Lucent Common Stock to be issued in exchange
for the Company Capital Stock of the Key Founders, which shall be registered in
the name of the Supplemental Escrow Agent as nominee. Such shares shall be
beneficially owned
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by the Key Founders, shall be held in escrow and shall be available to
compensate Lucent as provided in the Supplemental Escrow Agreement. To the
extent not used for such purpose, such shares shall be released as provided in
the Supplemental Escrow Agreement.
(c) No dividends or other distributions declared or made after
the Effective Time with respect to the Lucent Common Stock with a record date
after the Effective Time shall be paid to any holder entitled by reason of the
Merger to receive certificates representing Lucent Common Stock and no cash
payment in lieu of a fractional share of Lucent Common Stock shall be paid to
any such holder pursuant to Section 1.8 until such holder shall have surrendered
its Certificates pursuant to this Section 1.9. Subject to applicable law,
following surrender of any such Certificate, such holder shall be paid, in each
case, without interest, (i) the amount of any dividends or other distributions
theretofore paid with respect to the shares of Lucent Common Stock represented
by the certificate received by such holder and having a record date on or after
the Effective Time and a payment date prior to such surrender and (ii) at the
appropriate payment date or as promptly as practicable thereafter, the amount of
any dividends or other distributions payable with respect to such shares of
Lucent Common Stock and having a record date on or after the Effective Time but
prior to such surrender and a payment date on or after such surrender.
(d) If any certificate representing shares of Lucent Common
Stock is to be issued or any cash is to be paid to any Person other than the
registered holder of the Certificate surrendered in exchange therefor, it shall
be a condition to such exchange that such surrendered Certificate shall be
properly endorsed and otherwise in proper form for transfer and such Person
either (i) shall pay to the Exchange Agent any transfer or other taxes required
as a result of the issuance of such certificates of Lucent Common Stock and the
distribution of such cash payment to such Person or (ii) shall establish to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Lucent or the Exchange Agent shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any holder of shares of Company Capital Stock such amounts as Lucent or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of any other applicable tax law.
To the extent that amounts are so withheld by Lucent or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Company Capital Stock in respect of
which such deduction and withholding was made by Lucent or the Exchange Agent.
All amounts in respect of taxes received or withheld by Lucent shall be disposed
of by Lucent in accordance with the Code or such other applicable tax law.
(e) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and subject to such other
customary conditions as the Board of Directors of the Surviving Corporation may
impose, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed Certificate the shares of Lucent Common Stock as determined under
Section 1.5(c) and pay any cash, dividends or other distributions as determined
in accordance with Sections 1.8 and 1.9(c) in respect of such Certificate;
provided, that Lucent may, in its reasonable discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificate to deliver a bond in such sum as it may reasonably require
as indemnity
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against any claim that may be made against Lucent, the Surviving Corporation or
the Exchange Agent with respect to the Certificate alleged to have been lost,
stolen or destroyed.
(f) At the close of business on the day on which the Effective
Time occurs, the stock transfer books of the Company shall be closed and
thereafter there shall be no further registration of transfers of shares of
Company Capital Stock on the records of the Company. From and after the
Effective Time, the holders of shares of Company Capital Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares except as otherwise provided herein or by applicable law.
1.10 Return of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the former holders of Company Capital Stock for
six months after the Effective Time shall be delivered to Lucent, upon its
request, and any such former holders who have not theretofore surrendered to the
Exchange Agent their Certificates shall thereafter look only to Lucent for
payment of their claim for shares of Lucent Common Stock, any cash in lieu of
fractional shares of Lucent Common Stock and any dividends or distributions with
respect to such shares of Lucent Common Stock, and Lucent agrees to promptly pay
any such claims. None of Lucent, Acquisition, the Exchange Agent or the Company
shall be liable to any former holder of Company Capital Stock for any such
shares of Lucent Common Stock held in the Exchange Fund (and any cash, dividends
and distributions payable in respect thereof) which are delivered to a public
official pursuant to an official request under any applicable abandoned
property, escheat or similar law.
1.11 No Further Ownership Rights in Company Capital Stock. All
certificates representing shares of Lucent Common Stock delivered upon the
surrender for exchange of any Certificate in accordance with the terms hereof
(including any cash paid pursuant to Section 1.8 or Section 1.9) shall be deemed
to have been delivered (and paid) in full satisfaction of all rights pertaining
to the Company Capital Stock previously represented by such Certificate.
1.12 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (a) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either the Company or Acquisition or (b) otherwise to carry out the purposes of
this Agreement, the Surviving Corporation and its proper officers and directors
or their designees shall be authorized to execute and deliver, in the name and
on behalf of either the Company or Acquisition, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of the Company or
Acquisition, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of the Company or
Acquisition, as applicable, and otherwise to carry out the purposes of this
Agreement.
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2. Approval by Stockholders
2.1 Approval by Stockholders. Each of Acquisition and the
Company shall either (i) call a meeting of its respective stockholders to be
held as promptly as practicable after the date hereof or (ii) solicit written
consents of its respective stockholders in lieu thereof for purposes of voting
upon this Agreement. Each of the Company and Acquisition will, through its
respective boards of directors, recommend to their respective stockholders
approval of this Agreement. The Company shall provide Lucent with a copy of all
materials to be distributed to its stockholders describing the transactions
contemplated hereby not later than one day prior to distribution. The Company,
Acquisition and Lucent agree to execute and deliver such further documents and
instruments and to do such other acts and things as may be required to complete
all requisite corporate action in connection with the transactions contemplated
by this Agreement. All materials distributed to the stockholders of the Company
with respect to this Agreement, including any description of the transactions
contemplated hereunder, the recommendation of the Board of Directors of the
Company that such stockholders approve the Merger, the vote by such stockholders
to approve this Agreement and the Merger and any description of appraisal rights
available to such stockholders shall be in form and substance reasonably
acceptable to Lucent and the Company and shall be in accordance with applicable
law.
3. Representations and Warranties of the Company. The Company
represents and warrants to Acquisition and Lucent as follows:
3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority and all necessary
governmental approval to carry on its business as it has been and is now being
conducted. CN Ltd. is a limited company duly organized, validly existing and is
not subject to any cause for removal from the Companies' Registrar under the
laws of the State of Israel and has all requisite power and authority and all
necessary governmental approval to carry on its business as it has been and is
now being conducted, except where the failure to be so qualified or licensed and
in good standing could not reasonably be expected to have a Material Adverse
Effect. Except as set forth in Schedule 3.1, each of the Company and CN Ltd. is
duly qualified or licensed as a foreign corporation to do business and is in
good standing in each jurisdiction where the nature of its business or the
ownership, leasing or operation of its properties makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed and
in good standing could not reasonably be expected to have a Material Adverse
Effect.
3.2 Capitalization; Options and Other Rights. (a) The total
authorized shares of capital stock of the Company consists of (i) (A)
100,000,000 shares of Company Common Stock, of which 10,646,770 shares are
issued and outstanding (the "Outstanding Common Shares"), 32,500,000 shares have
been reserved for the conversion (the "Reserved Common Shares") of the Company
Preferred Stock and 100,000 shares have been reserved for issuance upon exercise
of the Common Warrant (the "Common Warrant Shares" and collectively with the
Outstanding Common Shares and the Reserved Common Shares, the "Common Shares"),
and (B) 319,000 shares of Common A-1 Stock, of which no shares are issued and
outstanding, and
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(C) 930,000 shares of Common C-1 Stock, of which no shares are issued and
outstanding; and (ii) 32,500,000 shares of Company Preferred Stock, of which (A)
8,781,000 shares have been designated as Series A Preferred Stock, all of which
are issued and outstanding, (B) 319,000 shares have been designated as Series
A-1 Preferred Stock, all of which are issued and outstanding, (C) 5,500,000
shares have been designated as Series B Preferred Stock, 4,216,668 of which are
issued and outstanding, (D) 9,970,000 shares have been designated Series C
Preferred Stock, 9,647,942 of which are issued and outstanding, (E) 930,000
shares have been designated Series C-1 Preferred Stock, 445,018 of which are
issued and outstanding and (F) 7,000,000 shares have been designated Series D
Preferred Stock, 1,118,123 of which are issued and outstanding (such issued and
outstanding shares are collectively referred to as the "Outstanding Preferred
Shares") and up to 1,000,000 shares have been reserved for issuance upon
exercise of the Series D Warrant of which 613,916 shares would be required on
the date hereof (the "Preferred Warrant Shares" and together with the Common
Warrant Shares, the "Warrant Shares"; the Preferred Warrant Shares and the
Outstanding Preferred Shares are collectively referred to herein as the
"Preferred Shares"; and the Common Shares and the Preferred Shares are
collectively referred to herein as the "Shares"). All the Outstanding Common
Shares have been duly and validly authorized and issued and are fully paid and
nonassessable and all the Reserved Common Shares and the Common Warrant Shares,
when issued upon the conversion of the Company Preferred Stock and the exercise
of the Common Warrant, as applicable, will be duly and validly authorized and
issued and fully paid and nonassessable. All the Preferred Shares have been duly
and validly authorized and issued and are fully paid and nonassessable. The
Preferred Warrant Shares, when issued upon exercise of the Preferred Warrant,
will be duly and validly authorized and issued and fully paid and nonassessable.
None of the Shares has been issued and none of such Company Capital Stock will
be issued in violation of the preemptive rights of any stockholder of the
Company. The Outstanding Common Shares and Outstanding Preferred Shares have
been issued, and the shares of Company Common Stock to be issued upon the
conversion of the Company Preferred Stock or the exercise of the Common Warrant,
and the shares of Company Preferred Stock to be issued upon the exercise of the
Preferred Warrant, will be issued, in compliance in all material respects with
all applicable Federal, state and Israeli securities laws and regulations.
(b) Except as set forth in Section 3.2(a) and in Schedule
3.2(b), there are no existing agreements, subscriptions, options, warrants,
calls, commitments, trusts (voting or otherwise), or rights of any kind
whatsoever granting to any Person any interest in or the right to purchase or
otherwise acquire from the Company or granting to the Company any interest in or
the right to purchase or otherwise acquire from any Person, at any time, or upon
the occurrence of any stated event, any securities of the Company, whether or
not presently issued or outstanding, nor are there any outstanding securities of
the Company or any other entity which are convertible into or exchangeable for
other securities of the Company, nor are there any agreements, subscriptions,
options, warrants, calls, commitments or rights of any kind granting to any
Person any interest in or the right to purchase or otherwise acquire from the
Company or any other Person any securities so convertible or exchangeable, nor,
to the Best Knowledge of the Company, are there any proxies, agreements or
understandings with respect to the voting of the Shares or the direction of the
business operations or conduct of the Company, except as contemplated by this
Agreement.
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(c) Schedule 3.2(c) sets forth a true and complete list of all
holders of Company Capital Stock (including the amount and type of security held
by such holder).
3.3 Authority; Stockholder Vote. (a) The Company has full
power and authority to execute, deliver and perform this Agreement and the
transactions contemplated hereunder. The execution, delivery and performance of
this Agreement by the Company have been duly authorized and approved by all
necessary corporate or other action and, except for (i) the approval of this
Agreement by the stockholders of the Company and (ii) the filing and recordation
of appropriate merger documents as required by the DGCL, no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly
authorized, executed and delivered by the Company and is the legal, valid and
binding obligation of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(b) The execution, delivery and performance by the Company of
this Agreement and the consummation of the Merger do not, and will not, (i)
violate or conflict with any provision of the Certificate of Incorporation or
By-laws of the Company or the Memorandum of Association of CN Ltd., (ii) violate
any law, rule, regulation, order, writ, injunction, judgment or decree of any
court, governmental authority or regulatory agency applicable to the Company or
CN Ltd., except for violations which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect, or (iii) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any note, bond, indenture, lien, mortgage, lease,
permit, guaranty or other agreement, instrument or obligation to which the
Company is a party or by which any of its properties may be bound, except (A) as
set forth in Schedule 3.3(b) and (B) for violations, breaches or defaults which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(c) The execution and delivery of this Agreement by the
Company do not, and the performance by the Company of this Agreement will not,
require any consent, approval, authorization or permission of, or filing with or
notification to any governmental or regulatory authority, domestic or foreign,
or any other Person except for (i) the filing and recordation of appropriate
merger documents as required by the DGCL (ii) the filing of a premerger
notification and report form by the Company under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") and any
applicable filings and approvals under similar foreign antitrust laws and
regulations, (iii) the Israeli Regulatory Approvals and (iv) any such consent,
approval, authorization, permission, notice or filing which if not obtained or
made could not reasonably be expected to have a Material Adverse Effect.
(d) The Board of Directors of the Company (i) has approved
this Agreement and the transactions contemplated hereby, (ii) has determined
that the terms of the Merger are in the best interests of the stockholders of
the Company, and (iii) has resolved to recommend the
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approval of the Merger and the adoption of this Agreement and the consummation
of the transactions contemplated hereby to the stockholders of the Company.
(e) Pursuant to the provisions of the DGCL, the Certificate of
Incorporation of the Company, the By-laws of the Company and any other
applicable law, the only approval of holders of Company Capital Stock required
to approve the Merger and to approve and adopt this Agreement and the
transactions contemplated hereby is the approval of (i) a majority of the
outstanding shares of Company Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, voting
together as a single class on an as-converted basis and not as separate series
and (ii) a majority of the outstanding shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
voting together as a single class on an as-converted basis and not as separate
series (the "Requisite Stockholder Approval"), and prior to Closing this
Agreement and the transactions contemplated hereby shall have been so approved.
3.4 Charter Documents. The Company has previously furnished to
Lucent a true, complete and correct copy of the Certificate of Incorporation and
the By-laws of the Company and the Memorandum of Association of CN Ltd. The
Certificate of Incorporation and By-laws of the Company and the Memorandum of
Association of CN Ltd. are each in full force and effect. The Company is not in
violation of any provision of its Certificate of Incorporation or By-laws. CN
Ltd. is not in violation of any provision of its Memorandum of Association.
3.5 Financial Statements. (a) The Company has previously
furnished to Lucent true and complete copies of the following financial
statements of the Company and CN Ltd. (the "Financial Statements"):
(i) the audited consolidated balance sheet of the Company as
of December 31, 1999 (the "Balance Sheet"), together with a report by
PricewaterhouseCoopers LLP; and
(ii) the audited consolidated statements of operations,
stockholders' equity and cash flows of the Company for the fiscal year ended
December 31, 1999, together with a report by PricewaterhouseCoopers LLP; and
(iii) the unaudited consolidated balance sheet of the Company
as of April 30, 2000 (the "Unaudited Balance Sheet"); and
(iv) the unaudited consolidated statements of operations,
stockholders' equity and cash flows of the Company for the four-month period
ended April 30, 2000.
(b) The Financial Statements were prepared in accordance with
GAAP (except, in the case of the unaudited consolidated financial statements,
for normal and recurring year-end adjustments and the omission of footnotes).
The Financial Statements were prepared on the basis of the books and records of
the Company and CN Ltd. (in each case, as of the date of such Financial
Statements) and present fairly, in all material respects, the consolidated
financial position of the Company as of the dates thereof and the consolidated
results of the Company's operations and changes in stockholders' equity and cash
flows for each of the periods then ended in conformity with GAAP.
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3.6 Absence of Undisclosed Liabilities; Indebtedness. (a)
Except as disclosed on Schedule 3.6(a) or as set forth in the notes to the
Financial Statements, neither the Company nor CN Ltd. has any liability or
obligation of any nature (whether absolute, accrued or contingent or otherwise)
which is materially in excess of amounts shown or reserved therefor in the
Financial Statements other than (a) liabilities or obligations not required
under GAAP on a basis consistent with that of preceding accounting periods to be
reported on such Financial Statements and (b) liabilities or obligations
incurred after the date of the Unaudited Balance Sheet incurred in the ordinary
course of business and consistent with past practice.
(b) Except as disclosed on Schedule 3.6(b), neither the
Company nor CN Ltd. has any Indebtedness which has not been incurred in the
ordinary course of business and consistent with past practice. 3.7 Operations
and Obligations. (a) Except as set forth in Schedule 3.7(a) or reported on the
Unaudited Balance Sheet, since December 31, 1999, as to the Company or CN Ltd.:
(i) there has been no event or condition that has had or
reasonably could be expected to have a Material Adverse Effect (other than as a
result of business and economic conditions generally affecting the optical
networking industry); and
(ii) there has been no impairment, damage, destruction, loss
or claim, whether or not covered by insurance, or condemnation or other taking
which could reasonably be expected to have a Material Adverse Effect.
(b) Except (i) as set forth in Schedule 3.7(b) and (ii) for
actions required to be taken hereunder or approved in advance thereof by Lucent
in writing, since December 31, 1999, each of the Company and CN Ltd. has
conducted its business only in the ordinary course and consistent with past
practice. Without limiting the generality of the foregoing, since December 31,
1999, except as set forth in such Schedule, neither the Company nor CN Ltd. has:
(i) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver, or granted any option, warrant or other
right to purchase, any of its capital stock or other equity interest or any
security convertible into its capital stock or other equity interest;
(ii) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver any bonds, notes or other debt securities,
or borrowed or agreed to borrow any funds (other than intercompany debt) or
entered into any lease the obligations of which, in accordance with generally
accepted accounting principles, would be capitalized;
(iii) paid any obligation or liability (absolute or
contingent) other than liabilities reflected or reserved against in the Balance
Sheet and liabilities incurred since December 31, 1999 in the ordinary course of
business consistent with past practice;
(iv) declared or made, or agreed to declare or make, any
payment of dividends or distributions to its stockholders or purchased or
redeemed, or agreed to purchase or redeem, any Company Capital Stock;
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(v) except in the ordinary course of business consistent with
past practice, made or permitted any material amendment or termination of any
agreement to which the Company or CN Ltd. is a party and is or should be set
forth in Schedule 3.10;
(vi) undertaken or committed to undertake capital expenditures
exceeding $125,000 for any single project or related series of projects;
(vii) sold, leased (as lessor), transferred or otherwise
disposed of, mortgaged or pledged, or imposed or suffered to be imposed any Lien
on, any of the assets reflected on the Balance Sheet or any assets acquired by
the Company or CN Ltd. after December 31, 1999, except for inventory and
personal property sold or otherwise disposed of for fair value in the ordinary
course of its business consistent with past practice and except for Permitted
Liens;
(viii) canceled any debts owed to or claims held by the
Company or CN Ltd. (including the settlement of any claims or litigation) other
than intercompany debt;
(ix) accelerated or delayed collection of accounts receivable
in advance of or beyond their regular due dates or the dates when the same would
have been collected except in the ordinary course of its business consistent
with past practice;
(x) delayed or accelerated payment of any account payable or
other liability beyond or in advance of its due date or the date when such
liability would have been paid except in the ordinary course of its business
consistent with past practice;
(xi) entered into or become committed to enter into any other
material transaction except in the ordinary course of business;
(xii) allowed the levels of supplies or other materials
included in the inventory of the Company or CN Ltd. to vary materially from the
levels customarily maintained in accordance with past practice;
(xiii) except for increases in the ordinary course of business
consistent with past practice, instituted any increase in any compensation
payable to any employee of the Company or CN Ltd., amended any Benefit Plan or
modified any other benefits made available to any such employees;
(xiv) made any change in the accounting principles or made any
material change in accounting practices used by the Company and CN Ltd., in each
case, from those applied in the preparation of the Financial Statements; or
(xv) taken any of the actions which, under Section 5.2, it is
prohibited from taking between the date hereof and the Closing Date.
(c) Except as set forth in Schedule 3.7(c), there are no
accrued and unpaid dividends or distributions with respect to the Company
Capital Stock.
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3.8 Properties. (a) Each of the Company and CN Ltd. has good
and valid title to all its properties and assets reflected on the Balance Sheet
or acquired after the date thereof except for (i) properties and assets sold or
otherwise disposed of in the ordinary course of business since the date of such
Balance Sheet, (ii) leasehold interests, in which event the Company or CN Ltd.
has a valid leasehold interest and (iii) properties and assets which
individually or in the aggregate are not material to the operations of the
business of the Company or CN Ltd.
(b) Neither the Company nor CN Ltd. owns any real property.
3.9 Inventory. The inventories (and reserves established with
respect thereto) of the Company and CN Ltd. as of May 15, 2000 are as described
on Schedule 3.9. All such inventories (net of any reserves) are properly
included in the Financial Statements in accordance with GAAP and, to the Best
Knowledge of the Company, are of such quality as to be useable and saleable in
the ordinary course of business (subject in the case of work-in-process
inventory to completion in the ordinary course of business) and are reflected in
the books and records of the Company or CN Ltd. at the lower of average cost or
market value. Such inventories are located at the locations set forth in
Schedule 3.9.
3.10 Contracts. Schedule 3.10 lists any of the following not
otherwise listed on any other Schedule:
(a) each written contract or commitment which creates an
obligation on the part of the Company or CN Ltd. in excess of $100,000;
(b) each written debt instrument, including, without
limitation, any loan agreement, line of credit, promissory note, security
agreement or other evidence of indebtedness, where the Company or CN Ltd. is a
lender, borrower or guarantor, in a principal amount in excess of $150,000;
(c) each written contract or commitment restricting the
Company or CN Ltd. from engaging in any line of business;
(d) each written contract to which the Company or CN Ltd. is a
party which contains a provision relating to a change in control of the Company
or CN Ltd.;
(e) each written contract or commitment in excess of $50,000
to which the Company or CN Ltd. is a party for any charitable contribution;
(f) each written joint venture or partnership agreement to
which the Company or CN Ltd. is a party;
(g) each written distributorship, sales agency, sales
representative, reseller or marketing, value added reseller, original equipment
manufacturing, technology transfer, source code license or other license or
other agreement containing the right to sublicense software and/or technology,
in each case, to which the Company or CN Ltd. is a party;
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(h) each written agreement in excess of $50,000 to which the
Company or CN Ltd. is a party with respect to any assignment, discounting or
reduction of any receivables of the Company or CN Ltd.;
(i) each agreement, option or commitment or right with, or
held by, any third party to acquire any assets or properties, of the Company or
CN Ltd., having a value in excess of $125,000, except for contracts for the sale
of inventory, machinery or equipment in the ordinary course of business;
(j) each written employment or consulting contract entered
into by the Company or CN Ltd. which is currently in effect; and
(k) each supply agreement to which the Company or CN Ltd. is a
party that the Company or CN Ltd. could not readily replace without a material
impact on the Company or CN Ltd.
Except as set forth in Schedule 3.10, (i) there are no oral
contracts or commitments of the types described in this Section 3.10 which
create an obligation on the part of the Company which are individually in excess
of $75,000 or in the aggregate in excess of $125,000, (ii) there are no
contracts or commitments between the Company or CN Ltd. and any Affiliate, (iii)
there are no contracts, commitments or arrangements between the Company or CN
Ltd. and any employee which require the payment of any compensation upon the
occurrence of any specified contingency, (iv) there are no contracts or
arrangements to which the Company or CN Ltd. is a party, except this Agreement,
which require notice to, the consent of, or other than with respect to services
provided in connection with the Merger, any payment of any compensation (whether
as a penalty, liquidated damages or otherwise) to any party with respect to the
Merger or any of the transactions contemplated hereby or in the event of the
termination of such contract or arrangement on or following the Effective Time,
and (v) there are no contracts to which the Company or CN Ltd. is a party which
would create rights to any Person against Lucent or any of its Affiliates (other
than rights against the Company or CN Ltd. and as in effect on the Closing
Date).
3.11 Absence of Default. Except as set forth in Schedule 3.11,
(a) each of the agreements listed on Schedules 3.10, 3.14, 3.15 and 3.23 that
creates obligations of any Person in excess of $75,000 is, and, after giving
effect to the Merger, will be, valid and binding and in full force and effect,
in each case, without breaching the terms thereof or resulting in the forfeiture
or impairment of any rights thereunder and without notice to, the consent,
approval or act of, or the making of any filing with, any other Person; (b) each
of the Company and CN Ltd. has fulfilled and performed in all material respects
its obligations under each such agreement to which it is a party to the extent
such obligations are required by the terms thereof to have been fulfilled or
performed through the date hereof; (c) neither the Company nor CN Ltd. is
alleged in writing to be, and no other party to any such agreement is, to the
Best Knowledge of the Company, in default under, nor is there alleged in writing
to be any basis for termination of, any such agreement; (d) no event has
occurred and no condition or state of facts exists which, with the passage of
time or the giving of notice or both, would constitute such a default or breach
by the Company or CN Ltd. or, to the Best Knowledge of the Company, by any such
other party, and
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(e) neither the Company nor CN Ltd. is currently renegotiating any such
agreement or paying liquidated damages in lieu of performance thereunder. Except
as set forth in Schedule 3.28, complete and correct copies of all such
agreements (including all amendments) have been delivered to Lucent.
3.12 Litigation. Except as set forth in Schedule 3.12, (i)
there are no actions, suits, arbitrations, legal or administrative proceedings
or investigations pending or, to the Best Knowledge of the Company, threatened
against the Company or CN Ltd. and (ii) neither the assets or properties of the
Company or CN Ltd. nor the Business is subject to any judgment, order, writ,
injunction or decree of any court, governmental agency or arbitration tribunal.
Except as set forth in Schedule 3.12, neither the Company nor CN Ltd. is the
plaintiff in any such proceeding and neither the Company nor CN Ltd. is
contemplating commencing legal action against any other Person. None of the
litigation listed on Schedule 3.12 could reasonably be expected to have a
Material Adverse Effect.
3.13 Compliance with Law. Except as set forth in Schedule
3.13:
(a) each of the Company and CN Ltd. has complied in all
material respects with, and is not in violation of, in any material respect, any
law, ordinance or governmental rule or regulation (collectively, "Laws") to
which it or its business is subject; and
(b) each of the Company and CN Ltd. has obtained all licenses,
permits, certificates or other governmental authorizations (collectively
"Authorizations") necessary for the ownership or use of its assets and
properties or the conduct of its business other than Authorizations (i) which
are ministerial in nature and which the Company has no reason to believe would
not be issued in due course and (ii) which, the failure of the Company or CN
Ltd. to possess, would not subject the Company or CN Ltd., as applicable, to
penalties fines not to exceed the Dollar Equivalent $50,000 in the aggregate
("Immaterial Authorizations"); and
(c) neither the Company nor CN Ltd. has received written
notice of violation of, or to the Best Knowledge of the Company, has not
materially violated any Laws to which it or its business is subject or any
Authorization necessary for the ownership or use of its assets and properties or
the conduct of its business (other than Immaterial Authorizations).
3.14 Intellectual Property; Year 2000. (a) Each of the Company
and CN Ltd. owns, or is validly licensed or otherwise has the right to use, all
trademarks, trade secrets, trademark rights, trade names, trade name rights,
service marks, service mark rights and copyrights (the "Intellectual Property
Rights") which are material to the conduct of the Business. Schedule 3.14(a)
contains a list of (i) patents and patent applications ("Patents"), (ii)
trademark registrations and applications and (iii) copyright registrations and
applications owned by the Company and CN Ltd.
(b) To the Best Knowledge of the Company, neither the Company
nor CN Ltd. has infringed upon (without license to infringe), misappropriated or
violated any Patent or Intellectual Property Rights of any other Person. Except
as disclosed on Schedule 3.14(b), to the Best Knowledge of the Company, neither
the Company nor CN Ltd. has received any written charge, complaint, claim,
demand or notice alleging any such infringement, misappropriation or
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violation (including any claim that the Company or CN Ltd. must license or
refrain from using any Patents or Intellectual Property Rights of any other
Person) which has not been settled or otherwise fully resolved. Except as
disclosed on Schedule 3.14(b), to the Best Knowledge of the Company, no other
Person has infringed upon, misappropriated or violated any Patents or
Intellectual Property Rights owned by the Company or CN Ltd. or as to which the
Company or CN Ltd. has an exclusive license.
(c) Except as disclosed on Schedule 3.14(c), each employee,
agent, consultant, officer, director or contractor who has materially
contributed to or participated in the creation or development of any
copyrightable, patentable or trade secret material which is material to the
conduct of the Business by the Company and CN Ltd. on behalf of the Company or
CN Ltd. or any predecessor in interest thereto either: (i) is a party to a
"work-for-hire" agreement under which the Company or CN Ltd. is deemed to be the
original owner/author of all property rights therein; or (ii) has executed an
assignment or an agreement to assign in favor of the Company or CN Ltd. or such
predecessor in interest, as applicable, all right, title and interest in such
material, a copy of which assignment or agreement to assign has been made
available to Lucent.
(d) The Company has taken commercially reasonable steps to
ensure that CN Ltd.'s and CN Ltd.'s products (including current products and
technology and products and technology currently under development) are capable
upon installation of (i) operating in the same manner on dates in both the
Twentieth and Twenty-First centuries and (ii) processing, providing and
receiving date data from, into and between the Twentieth and Twenty-First
centuries, including the years 1999 and 2000 in the same manner, and (iii)
recognizing year 2000 as a leap year, provided that all non-Company
non-Subsidiary products (e.g., hardware, software or firmware) used in or in
combination with the Company's products or CN Ltd.'s products properly exchange
data with the Company's or CN Ltd.'s products in the same manner on dates in
both the Twentieth and Twenty-First centuries. In addition, each of the Company
and CN Ltd. has taken all commercially reasonable steps to assure that the year
2000 date change will not adversely affect its operations or the systems and
facilities that support the operations of the Company and CN Ltd.'s, except as
could not reasonably be expected to have a Material Adverse Effect. Finally, in
conjunction with the year 2000 date transitions, neither the Company nor CN Ltd.
has experienced any material date-related failures of its systems and has no
knowledge of any date-related issued experience by its customers with respect to
the Company's products or CN Ltd.'s products.
(e) Except as set forth in Schedule 3.14(e), (i) neither the
Company nor CN Ltd. has sold, assigned, transferred, licensed or sublicensed, or
entered into any contract to sell, assign, transfer or sublicense its Patents or
Intellectual Property Rights owned by, or exclusively licensed to, the Company
or CN Ltd. other than, in connection with the Company's or CN Ltd.'s assets, in
the ordinary course of business, permitting its customers to use any Patents or
Intellectual Property Rights embedded in its products and (ii) neither the
Company nor CN Ltd. has entered into any contract (oral or written) or other
arrangement pursuant to which the Company or CN Ltd. has agreed or is obligated
to license, transfer or place in escrow the source code for any of its products
(prior or current) or restrict the use of any of its Patents or Intellectual
Property Rights.
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(f) To the Best Knowledge of the Company, no Company
Stockholder or employee of the Company or CN Ltd. has any interest in any
Intellectual Property Rights or Patents (other than as a stockholder of the
Company) that is material to the business or operations of the Company or CN
Ltd. as currently conducted.
3.15 Tax Matters. (a) Except as set forth in Schedule 3.15,
(i) each of the Company and CN Ltd. has filed all Tax Returns required to be
filed; (ii) (A) all such Tax Returns are complete and accurate in all material
respects, except to the extent that a reserve for Taxes has been established on
the unaudited balance sheet, and (B) all Taxes shown to be due on such Tax
Returns have been timely paid; (iii) all Taxes (whether or not shown on any Tax
Return) owed by the Company or CN Ltd. have been timely paid or the Company has
established or caused to be established adequate reserves therefor on its
financial statements on at least a quarterly basis; (iv) neither the Company nor
CN Ltd. has waived or been requested to waive any statute of limitations in
respect of Taxes, which waiver or request is still in effect; (v) none of the
Tax Returns referred to in clause (i) have been examined by the Internal Revenue
Service; (vi) to the Best Knowledge of the Company, there is no action, suit,
investigation, audit, claim or assessment pending or proposed or threatened with
respect to Taxes of the Company or CN Ltd.; (vii) all deficiencies asserted or
assessments made as a result of any examination of the Tax Returns referred to
in clause (i) have been paid in full or have been reserved against and entered
into the books and records of the Company; (viii) Tax indemnity arrangements, if
any, will terminate prior to Closing and the Surviving Corporation will not have
any liability thereunder on or after Closing; (ix) there are no liens for Taxes
upon the assets of the Company or CN Ltd. except liens relating to current Taxes
not yet due and payable; (x) all Taxes which the Company or CN Ltd. is required
by law to withhold or to collect for payment have been duly withheld and
collected, and have been paid or accrued, reserved against and entered on the
books of the Company or CN Ltd. in accordance with GAAP; and (xi) neither the
Company nor CN Ltd. is or has been a member of any group of corporations filing
a consolidated tax return for United States federal income tax purposes.
(b) No consent to the application of Section 341(f)(2) of the
Code has been filed with respect to any property or assets held or acquired or
to be acquired by the Company.
(c) Neither the Company nor CN Ltd. (i) has agreed to or is
required to make any adjustment pursuant to Section 481(a) of the Code other
than by reason of the transactions contemplated by this Agreement, (ii) has any
knowledge that the Internal Revenue Service ("IRS") has proposed any such
adjustment or change in accounting method with respect to the Company or (iii)
has any application pending with the IRS or any other tax authority requesting
permission for any change in accounting method.
(d) Except as set forth in Schedule 3.15 and except for the
Company's ownership of CN Ltd., neither the Company nor CN Ltd. owns an interest
in any (i) domestic international sales corporation, (ii) foreign sales
corporation, (iii) controlled foreign corporation, or (iv) passive foreign
investment company.
(e) Neither the Company nor CN Ltd. is a party (other than as
an investor) to any industrial development bond.
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(f) The Company has never been and is not a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(g) Neither the Company nor CN Ltd. has constituted either a
"distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (i) in the
two years prior to the date of this Agreement or (ii) in a distribution which
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
3.16 Employee Benefit Plans. (a) Except as set forth on
Schedule 3.16(a), all amounts which CN Ltd. is required by law or by agreement
with its employees to deduct from such employees' salaries and/or transfer to
such employees' pension, life insurance, incapacity insurance, continuing
education fund or other plans have been duly paid into the appropriate fund or
funds, and CN Ltd. has no outstanding obligation to make any such transfer or
provision.
(b) With respect to the Company:
(i) The Company does not have any "employee pension benefit
plan" (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), or "employee welfare benefit plans" (as defined
in Section 3(1) of ERISA). Schedule 3.16(b)(i) contains a list and brief
description of all Benefit Plans maintained, or contributed to, by the Company
or any Person that, together with the Company, is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Code (the Company and each such
other Person, a "Commonly Controlled Entity") for the benefit of any current or
any former employees, officers or directors of the Company. The Company has made
available to Lucent true, complete and correct copies of (i) each Benefit Plan
(or, in the case of any unwritten Benefit Plans, descriptions thereof), (ii) the
most recent summary plan description for each Benefit Plan for which such
summary plan description is required, (iii) each trust agreement and group
annuity contract relating to any Benefit Plan and (iv) all correspondence with
the IRS, the United States Department of Labor or other governmental entity
relating to any outstanding controversy or audit. Except as could not reasonably
be expected to have a Material Adverse Effect, each Benefit Plan has been
administered in accordance with its terms.
(ii) The Company has not maintained, contributed to or been
obligated to contribute to any plan that is subject to Title IV of ERISA.
(iii) Except as set forth in Schedule 3.16(b)(iii), since the
date of the most recent audited consolidated financial statements, there has not
been any adoption or amendment by the Company of any Benefit Plan, or any change
in any actuarial or other assumption used to calculate funding obligations with
respect to any Benefit Plan, or any change in the manner in which contributions
to any Benefit Plan are made or the basis on which such contributions are
determined.
(iv) Schedule 3.16(b)(iv) lists all outstanding Company Stock
Options, showing for each such Option: (i) the name of the optionee, (ii) the
number of shares issuable, (iii) the number of vested shares as of the date
hereof and (v) the exercise price. As set forth in such
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Schedule, the per share exercise price of each option granted under the Company
Stock Plan is not less than the fair market value of a share of Company Common
Stock on the date of grant of the applicable Company Stock Option, as determined
in good faith by the Board of Directors of the Company. Except as set forth on
Schedule 3.16(b)(iv), none of the outstanding Company Stock Options is subject
to acceleration or cancellation as a result of the Merger.
(v) Except as set forth in Schedule 3.16(b)(v) or as provided
by this Agreement, no employee of the Company will be entitled to any additional
compensation or benefits or any acceleration of the time of payment or vesting
of any compensation or benefits under any Benefit Plan as a result of the
transactions contemplated by this Agreement.
(vi) Except as set forth in Schedule 3.16(b)(vi), the Company
has not issued any Company Common Stock under any restricted stock purchase
arrangement and the Company is not a party to any restricted stock purchase
arrangement. After giving effect to the Merger, the Company shall be subject to
the restricted stock purchase arrangements set forth in Schedule 3.16(b)(vi),
which Schedule also lists (i) the number of shares of restricted stock issuable
and (ii) the vesting schedule for the shares of restricted stock.
(c) Schedule 3.16(c) lists all shares of Company Capital Stock
issued pursuant to any restricted stock purchase agreement or stock option
agreement (including, without limitation, any such agreement amended in
accordance with the provisions of this Agreement and any stock option agreement
issued under the Company Stock Plan, the "Restricted Stock Agreements"),
including (i) the date such shares were sold, (ii) the purchase price per share
(which is also the price at which the Company may repurchase such shares), (iii)
the number of shares issued, (iv) the number of such shares which, as of the
date hereof, are no longer subject to repurchase rights in favor of the Company
and (v) the number of such shares which, as of the date hereof, remain subject
to repurchase rights in favor of the Company and the schedule for which such
rights expire. All Restricted Stock Agreements are for the purchase of Company
Common Stock. Except as indicated on Schedule 3.16(c) hereto, the transactions
contemplated by this Agreement, including without limitation the Merger, shall
not cause any acceleration, vesting or other similar consequences to the rights
of the parties under any provision of any Restricted Stock Agreement or under
the Company Stock Plan; and following the Merger, the repurchase rights in favor
of the Company (to the extent otherwise applicable at that time) shall remain in
full force and effect on the Substitute Restricted Stock.
3.17 Executive Employees. (a) Schedule 3.17 lists the names,
titles and current annual salary rates of and bonuses paid or payable to all
present officers and employees of the Company or CN Ltd. whose 1999 annual base
salary exceeded $75,000 ("Executive Employees").
(b) Except as set forth in Schedules 3.16 or 3.17, neither the
Company nor CN Ltd. has any employment agreement with, or maintains any employee
benefit plan (within the meaning of Section 3(3) of ERISA) with respect to, any
of its Executive Employees. There are no agreements with respect to Executive
Employees which would obligate the Company or CN Ltd. to make any payment or
provide any benefit the deduction of which is limited by Section 280G of the
Code or that could be subject to tax under Section 4999 of the Code.
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3.18 Employees. Schedule 3.18 contains true, full and accurate
particulars of the names and salaries of all the employees and officers of the
Company and CN Ltd. The salary figures set forth in Schedule 3.18 include all
remuneration payable, vacation pay balances, balances in provident or pension
funds, "13th month" and "14th month" salary commitments or customs, manager's
insurance and any profit sharing commission, incentive or discretionary bonus
arrangements to which the Company or CN Ltd. is a party. All officers and
employees of CN Ltd. have personal employment agreements, copies of which have
been delivered to Lucent. Except as set forth in Schedule 3.18:
(i) each of the Company and CN Ltd. has complied with all
applicable laws, rules and regulations respecting employment and employment
practices, terms and conditions of employment, wages and hours, recuperation
("havraa") pay and illness pay, other than instances of non-compliance which,
individually or in the aggregate, could not be reasonably expected to result in
a Material Adverse Effect, and neither the Company nor CN Ltd. is liable for any
arrears of wages or any taxes or penalties for failure to comply with any such
laws, rules or regulations;
(ii) the Company believes that the Company's and CN Ltd.'s
relations with its employees is satisfactory;
(iii) there are no controversies pending or, to the Best
Knowledge of the Company, threatened between the Company or CN Ltd. and any of
its employees, which controversies have or could reasonably be expected to have
a Material Adverse Effect;
(iv) neither the Company or CN Ltd. is a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by the Company or CN Ltd. nor, to the Best Knowledge of the
Company, are there any activities or proceedings of any labor union to organize
any such employees;
(v) CN Ltd. is not subject to, nor do any of its employees
benefit from, any payment or undertaking with respect to the terms of their
employment (including, without limitation, amounts payable in respect of
severance pay);
(vi) there are no unfair labor practice complaints pending
against the Company or CN Ltd. before the National Labor Relations Board or any
other governmental authority with jurisdiction over labor practices, or any
current union representation questions involving employees of the Company or CN
Ltd.;
(vii) there is no strike, slowdown, work stoppage or lockout
existing, or, to the Best Knowledge of the Company, threatened, by or with
respect to any employees of the Company or CN Ltd.;
(viii) no charges are pending before the Equal Employment
Opportunity Commission or any state, local or foreign agency responsible for the
prevention of unlawful employment practices with respect to the Company or CN
Ltd.;
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(ix) there are no claims pending against the Company or CN
Ltd. before any workers' compensation board;
(x) neither the Company nor CN Ltd. has received written
notice that any federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws intends to conduct an investigation of
or relating to the Company or CN Ltd. and, to the Best Knowledge of the Company,
no such investigation is in progress;
(xi) there are no agreements between the Company or CN Ltd.
and any of their respective directors, officers, executives or employees which
cannot be terminated by the Company or CN Ltd. upon two weeks notice or less
without giving rise to a claim for damages or compensation (except for statutory
severance pay); and
(xii) other than any rights contemplated under Section 5.6 of
this Agreement, the severance pay due to employees of the Company and of CN Ltd.
is either funded or provided for on the Balance Sheet. Except as set forth in
Schedule 3.18, the Company is not aware of any circumstance whereby any employee
might reasonably demand (whether legally entitled to or not) any claim for
compensation on termination of employment beyond the statutory severance pay to
which such employee is entitled and, except rights contemplated under Section
5.6 of this Agreement, the Company is not aware of any claim to be made by any
employee for payment of compensation arising from the Merger by Lucent.
3.19 Environmental Laws. Neither the Company nor CN Ltd. has
received any notice or claim (and is not aware of any facts that would form a
reasonable basis for any claim), or entered into any negotiations or agreements
with any other Person, and, to the Best Knowledge of the Company, neither the
Company nor CN Ltd. is the subject of any investigation by any governmental or
regulatory authority, domestic or foreign, relating to any material or
potentially material liability or remedial action under any Environmental Laws.
There are no pending or, to the Best Knowledge of the Company, threatened,
actions, suits or proceedings against the Company, CN Ltd. or any of the
properties, assets or operations of the Company or CN Ltd. asserting any such
material liability or seeking any material remedial action in connection with
any Environmental Laws.
3.20 Bank Accounts, Letters of Credit and Powers of Attorney.
Schedule 3.20 lists (a) all bank accounts, lock boxes and safe deposit boxes
relating to the business and operations of the Company and CN Ltd. (including
the name of the bank or other institution where such account or box is located
and the name of each authorized signatory thereto), (b) all outstanding letters
of credit issued by financial institutions for the account of the Company or CN
Ltd. (setting forth, in each case, the financial institution issuing such letter
of credit, the maximum amount available under such letter of credit, the
material terms (including the expiration date) of such letter of credit and the
party or parties in whose favor such letter of credit was issued), and (c) the
name and address of each Person who has a power of attorney to act on behalf of
the Company or CN Ltd. The Company has heretofore delivered to Lucent true,
correct and complete copies of each letter of credit and each power of attorney
described on Schedule 3.20.
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3.21 Subsidiaries. (a) The total authorized shares of capital
stock of CN Ltd. consists of (i) 34,000 ordinary shares, 1 NIS par value, of
which 500 shares are issued and outstanding (the "CN Ltd. Shares"). All the CN
Ltd. Shares are beneficially owned by the Company. All the CN Ltd. Shares have
been duly and validly authorized and issued and are fully paid and
nonassessable. Except as set forth on Schedule 3.21, none of the CN Ltd. Shares
has been issued in violation of the preemptive rights of any stockholder of CN
Ltd. The CN Ltd. Shares were issued in compliance in all material respects with
all applicable laws and regulations. The Company owns its CN Ltd. Shares free
and clear of any Liens. CN Ltd. is the Company's only Subsidiary and other than
CN Ltd. the Company does not (i) own, directly or indirectly, any outstanding
voting securities or equity securities or (ii) serve as a general partner to any
other Person.
(b) Except as set forth in Schedule 3.21, there are no
existing agreements, subscriptions, options, warrants, calls, commitments,
trusts (voting or otherwise), or rights of any kind whatsoever granting to any
Person any interest in or the right to purchase or otherwise acquire from CN
Ltd. or granting to CN Ltd. any interest in or the right to purchase or
otherwise acquire from any Person, at any time, or upon the occurrence of any
stated event, any securities of CN Ltd., whether or not presently issued or
outstanding, nor are there any outstanding securities of CN Ltd. or any other
entity which are convertible into or exchangeable for other securities of CN
Ltd., nor are there any agreements, subscriptions, options, warrants, calls,
commitments or rights of any kind granting to any Person any interest in or the
right to purchase or otherwise acquire from CN Ltd. or any other Person any
securities so convertible or exchangeable, nor are there any proxies, agreements
or understandings with respect to the voting of the CN Ltd. Shares or the
direction of the business operations or conduct of CN Ltd.
3.22 Affiliate Transactions. Except for the individuals listed
on Schedule 3.22, (i) no officer or director of the Company or CN Ltd. has any
significant interest in any Person that is engaged in a business which is in
competition with the Business and (ii) no officer or director of the Company or
CN Ltd. is a supplier to, or a customer of, the Company or CN Ltd., or is a
party to any contract listed on Schedules 3.10, 3.14 or 3.24.
3.23 Insurance. Schedule 3.23 sets forth a list of all
policies of insurance maintained, owned or held by the Company or CN Ltd. as of
the date hereof. The Company shall use all commercially reasonable efforts to
keep such insurance or comparable insurance in full force and effect through the
Closing Date. Each of the Company and CN Ltd. has complied in all material
respects with each such insurance policy to which it is a party and has not
failed to give any notice or present any claim thereunder in a due and timely
manner, other than instances which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect. Except as disclosed on
Schedule 3.23, to the Best Knowledge of the Company, the full policy limits
(subject to deductibles provided in such policies) are available and unimpaired
under each such policy and no insurer under any of such policies has a basis to
void such policy on grounds of non-disclosure on the part of the Company or CN
Ltd. thereunder. Each such policy is in full force and effect and will not in
any way be affected by or terminate or lapse by reason of the transactions
contemplated by this Agreement.
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3.24 Leases. Schedule 3.24 lists all outstanding leases, both
capital and operating, or licenses, pursuant to which the Company or CN Ltd. has
(i) obtained the right to use or occupy any real or personal property where the
value of such personal property exceeds $25,000 in the case of any single lease
or $75,000 in the aggregate, or (ii) granted to any other Person the right to
use any property described on Schedule 3.24.
3.25 Assets. (a) Schedule 3.25 lists each material item of
machinery, equipment, furniture, vehicles or other personal property owned by
the Company or CN Ltd. having an original cost of $50,000 or more.
(b) Except as set forth in Schedule 3.25, the assets and
properties owned or leased by the Company and CN Ltd. constitute all the
material assets and properties used by the Company and CN Ltd. in the operation
of its business (including all books, records, computers and computer programs
and data processing systems but excluding Intellectual Property Rights and
Patents) and are in good and serviceable condition (subject, in each case, to
normal wear and tear and obsolescence and except for assets the book value of
which does not exceed $50,000 in the aggregate; provided that the foregoing
wear, tear and obsolescence shall not materially disrupt the business of the
Company and CN Ltd. as presently being conducted) and are suitable for the uses
for which intended.
3.26 Government Grant Programs. Schedule 3.26 provides a
complete list of all pending and outstanding grants, tax benefits, incentives
and subsidies (collectively, "Grants") from the government of the State of
Israel or any agency thereof, or from any other governmental or administrative
agency, to the Company or CN Ltd. relating to the Business, including, without
limitation, (i) Approved Enterprise Status from the Investment Center and (ii)
grants from the Office of the Chief Scientist ("OCS"). The Company has made
available to Lucent, prior to the date hereof, correct copies of all
applications for Grants submitted by the Company or CN Ltd. and all letters of
approval, and supplements thereto, granted to the Company. Schedule 3.26
provides all material undertakings of the Company given in connection with the
Grants. Without limiting the generality of the above, Schedule 3.26 includes the
aggregate amounts of each Grant, and the aggregate outstanding obligations
thereunder of the Company or CN Ltd. with respect to royalties, or the
outstanding amounts to be paid by the OCS to the Company or CN Ltd. and the
composition of such obligations or amount by the product or product family to
which it relates. Each of the Company and CN Ltd. is in compliance, in all
material respects, with the terms and conditions of their respective Grants and,
except as disclosed in Schedule 3.26, have duly fulfilled, in all material
respects, all the undertakings relating thereto. The Company is not aware of any
event or other set of circumstances which might lead to the revocation or
material modification of any of the Grants.
3.27 Minute Books. The minute books of the Company and CN Ltd.
made available to Lucent contain, in all material respects, a complete and
accurate summary of all meetings of directors and stockholders or actions by
written resolutions since the time of organization of the Company and CN Ltd.,
respectively, through the date of this Agreement, and reflect all transactions
referred to in such minutes and resolutions accurately, except for omissions
which are not material.
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3.28 Complete Copies of Materials. Except as set forth in
Schedule 3.28, the Company has delivered or made available true and complete
copies of each document that has been requested by Lucent or its counsel in
connection with their legal and accounting review of the Company and CN Ltd.
3.29 Disclosure. None of the representations or warranties of
the Company contained herein, none of the information contained in the Schedules
referred to in this Section 3, and none of the other information or documents
furnished or to be furnished to Lucent or Acquisition by the Company pursuant to
any provision of this Agreement, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact herein or
therein necessary in order to make the statements contained herein or therein
not misleading in any material respect.
3.30 Reorganization. Neither the Company nor CN Ltd. has taken
any action or failed to take any action which action or failure would reasonably
be expected to jeopardize the qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
3.31 Export Control Laws. Each of the Company and CN Ltd. has
conducted its export transactions in accordance with applicable provisions of
United States and Israel export control laws and regulations, except for such
violations which would not have a Material Adverse Effect. Without limiting the
foregoing:
(i) each of the Company and CN Ltd. has obtained all export
licenses and other approvals required for its exports of products, software and
technologies from the United States and the State of Israel, as applicable,
except where the failure to obtain such export licenses and other approvals
would not subject the Company to penalties other than fines not to exceed the
Dollar Equivalent $100,000 in the aggregate;
(ii) each of the Company and CN Ltd. is in compliance in all
material respects with the terms of all applicable export licenses or other
approvals;
(iii) there are no pending or, to the Best Knowledge of the
Company, threatened claims against the Company or CN Ltd. with respect to such
export licenses or other approvals;
(iv) there are no actions, conditions or circumstances
pertaining to the Company's or CN Ltd.'s export transactions that could
reasonably be expected to give rise to any future claims; and
(v) no consents or approvals for the transfer of export
licenses to Lucent are required, or such consents and approvals can be obtained
expeditiously without material cost.
4. Representations and Warranties of Acquisition and Lucent. Each
of Acquisition and Lucent represents and warrants to the Company as follows:
4.1 Organization. Each of Lucent and Acquisition is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has
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all requisite corporate and authority and all necessary governmental approvals
to enter into this Agreement and the transactions contemplated hereby to be
performed by it.
4.2 Capital Structure. The authorized capital stock of Lucent
consists of (i) 10,000,000,000 shares of common stock, par value $.01 per share
("Lucent Common Stock") and (ii) 250,000,000 shares of preferred stock, par
value $1.00 per share ("Lucent Authorized Preferred Stock"), of which 7,500,000
shares have been designated Series A Junior Participating Preferred Stock
("Lucent Junior Preferred Stock"). As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of Lucent having the right to vote (or
convertible into, or exchangeable for, securities having the right to vote) on
any matters on which stockholders of Lucent may vote are issued or outstanding.
All outstanding shares of capital stock of Lucent are, and all shares which may
be issued in connection with the transactions contemplated hereby will be, when
issued, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. The shares of outstanding Lucent Common Stock were
issued in compliance in all material respects with all Laws. The shares of
Lucent Common Stock to be issued pursuant to the Merger will be duly and validly
authorized and issued, will be fully paid and non-assessable and will be issued
in compliance in all material respects with all applicable Federal and state
securities laws and regulations.
4.3 Authority.
(a) Each of Lucent and Acquisition has full corporate power
and authority to execute, deliver and perform this Agreement and the
transactions contemplated hereunder. The Board of Directors of Acquisition has
declared the Merger advisable and approved this Agreement and resolved to
recommend the approval of the Merger and adoption of this Agreement and the
consummation of the transactions contemplated hereby to the sole stockholder of
Acquisition. The execution, delivery and performance of this Agreement by each
of Lucent and Acquisition has been duly authorized and approved (i) in the case
of Acquisition, by its Board of Directors and sole stockholder and (ii) in the
case of Lucent, by all necessary corporate action and, except for (A) the
adoption of this Agreement by the stockholders of Acquisition and (B) the filing
of appropriate merger documents as required by the DGCL, no other corporate
proceedings other than actions previously taken on the part of either Lucent or
Acquisition are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by each of Lucent and Acquisition and is the legal, valid and binding
obligation of each of Lucent and Acquisition enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law). The filing of the Registration Statement has been duly authorized by
Lucent.
(b) The execution, delivery and performance by each of Lucent
and Acquisition of this Agreement and the consummation of the Merger do not, and
will not, (i) violate or conflict with any provision of the certificate of
incorporation or by-laws of either Lucent or Acquisition, (ii) violate any law,
rule, regulation, order, writ, injunction, judgement or decree of any court,
governmental authority, or regulatory agency, except for violations which,
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individually or in the aggregate, will not have a Material Adverse Effect on
Lucent and Acquisition taken as a whole, or (iii) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration)
under, any note, bond, indenture, lien, mortgage, lease, permit, guaranty or
other agreement, instrument or obligation, oral or written, to which Lucent or
Acquisition is a party or by which any of the properties of Lucent or
Acquisition may be bound, except for violations, breaches or defaults which,
individually or in the aggregate, will not have a Material Adverse Effect on
Lucent, its Subsidiaries and Acquisition taken as a whole.
(c) The execution and delivery of this Agreement by each of
Lucent and Acquisition does not, and the performance by each of Lucent and
Acquisition of this Agreement will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, or any other Person except for (i)
the filing and recordation of appropriate merger documents as required by the
DGCL; (ii) the filing of a premerger notification and report form by the Company
under the HSR Act; (iii) any such consent, approval, authorization, permission,
notice or filing which is required under the Securities Act of 1933 (together
with the rules and regulations thereunder, the "Securities Act"), the Securities
Exchange Act of 1934 (together with the rules and regulations promulgated
thereunder, the "Exchange Act") and applicable state securities laws; and (iv)
any such consent, approval, authorization, permission, notice or filing which if
not obtained or made would not have a Material Adverse Effect on Lucent, its
Subsidiaries and Acquisition taken as a whole.
4.4 Litigation. Neither Lucent nor Acquisition is a party to
(i) any action, suit, arbitration, legal or administrative proceeding or
investigation pending or, to the best knowledge of Lucent, threatened against
Lucent, any of its Subsidiaries or Acquisition; or (ii) any action, suit,
arbitration or proceeding as to which Lucent or any such Subsidiary is the
plaintiff or Lucent or any such Subsidiary is contemplating commencing legal
action against any other Person, in each case (i) and (ii) which could
reasonably be expected to have a Material Adverse Effect on Lucent, its
Subsidiaries and Acquisition taken as a whole. There is no judgment, order,
writ, injunction or decree of any court, governmental agency, tribunal or other
governmental or regulatory authority as to which any of the assets, properties
or business of Lucent, any of its Subsidiaries or Acquisition is subject, which
could reasonably be expected to have a Material Adverse Effect on Lucent, its
Subsidiaries and Acquisition taken as a whole.
4.5 SEC Documents; Undisclosed Liabilities. Since October 1,
1998, Lucent has filed with the Securities and Exchange Commission ("SEC") all
reports, schedules, forms, statements and other documents (including exhibits
and all other information incorporated therein) required to be filed under the
Securities Act and the Exchange Act (the "Lucent SEC Documents"). As of their
respective dates, the Lucent SEC Documents complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder applicable
to such Lucent SEC Documents. Except to the extent that information contained in
any Lucent SEC Document has been revised or superseded by a later filed Lucent
SEC Document, none of the Lucent SEC Documents when filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
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statements of Lucent included in the Lucent SEC Documents comply as to form, as
of their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present in all material respects the consolidated financial position of Lucent
and its consolidated Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal recurring year-end audit
adjustments). Except for liabilities (i) reflected in such financial statements
or in the notes thereto, (ii) incurred in the ordinary course of business
consistent with past practice since the date of the most recent audited
financial statements included in the Lucent Filed SEC Documents, or (iii)
incurred in connection with this Agreement or the transactions contemplated
hereby, neither Lucent nor any of its Subsidiaries has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Lucent or its Subsidiaries taken as a whole.
4.6 Information Supplied. None of the information supplied or
to be supplied by Lucent specifically for inclusion or incorporation by
reference in the Registration Statement will, at the time the Registration
Statement is filed with the SEC and at the time the Registration Statement
becomes effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Registration
Statement will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that no
representation or warranty is made by Lucent with respect to statements made or
incorporated by reference therein based on information supplied by the Company
specifically for inclusion or incorporation by reference in the Registration
Statement.
4.7 Absence of Certain Changes. Except for liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby or thereby and except as disclosed in the Lucent SEC Documents filed and
publicly available prior to the date of this Agreement (the "Lucent Filed SEC
Documents"), since September 30, 1999, Lucent and its Subsidiaries have
conducted their business only in the ordinary course, and there has not been (i)
any event or occurrence which could have a Material Adverse Effect, (ii) except
insofar as may have been or required by a change in GAAP, any change in
accounting methods, principles or practices by Lucent materially affecting its
assets, liabilities or business, (iii) any tax election that individually or in
the aggregate could reasonably be expected to have a Material Adverse Effect or
any of its tax attributes or any settlement or compromise of any material income
tax liability, or (iv) any split, combination or reclassification of any of
Lucent's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution, for shares of
Lucent's capital stock, except for issuances of Lucent Common Stock upon the
exercise of outstanding stock options or other rights to purchase or receive
Lucent Common Stock granted under stock compensation plans maintained by Lucent,
various plans of companies acquired by Lucent, and warrants issued by companies
acquired by Lucent, in each case awarded prior to the date hereof in accordance
with their present terms.
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4.8 Interim Operations of Acquisition. Acquisition was formed
solely for the purpose of engaging in transactions of the type contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
4.9 Reorganization. Neither Lucent nor any of its Subsidiaries
has taken any action or failed to take any action which action or failure would
reasonably be expected to jeopardize the qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
5. Conduct Pending Closing.
5.1 Conduct of Business Pending Closing. From the date hereof
until the Closing, the Company will and will cause CN Ltd. to:
(a) maintain its existence in good standing;
(b) use its reasonable best efforts to maintain the general
character of its business and properties and conduct its business in the
ordinary and usual manner consistent with past practices, except as expressly
permitted by this Agreement;
(c) maintain business and accounting records consistent with
past practices;
(d) use its reasonable best efforts (i) to preserve its
business intact, (ii) to keep available to the Company or CN Ltd. services of
its present officers and employees, and (iii) to preserve for the Company or CN
Ltd. the goodwill of its suppliers, customers and others having business
relations with the Company or CN Ltd.; and
(e) use its reasonable best efforts to cause each holder of
Company Capital Stock to execute and deliver a substitute IRS Form W-9 or IRS
Form W-8BEN, as applicable, to Acquisition and Lucent.
5.2 Prohibited Actions Pending Closing. Unless otherwise
provided for herein, approved by Lucent in writing, from the date hereof until
the Closing, the Company shall not and shall cause CN Ltd. not to:
(a) amend or otherwise change its charter documents;
(b) issue or sell or authorize for issuance or sale, or grant
any options or make other agreements with respect to, any shares of its capital
stock or any other of its securities, except for (i) the grant of shares upon
the exercise of the Warrants, (ii) the issuance of shares upon the exercise of
the Company Stock Options and (iii) the grant of options to purchase up to
100,000 shares under the Company Stock Plan to new employee hires in amounts and
with exercise prices in the ordinary course of business in amounts consistent
with past practice, and with exercise prices not less than the fair market value
after giving effect to the transactions contemplated in the Merger on the date
of issuance of the shares purchasable under the options;
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(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise with respect to any
of its capital stock;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership, other business
organization or any division thereof or any material amount of assets; (ii)
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any Person, or make any loans or advances,
except for (A) short term borrowings incurred in the ordinary course of business
and consistent with past practice (or to refinance existing or maturing
indebtedness) in an amount not to exceed at any one time outstanding of $500,000
in the aggregate or (B) intercompany indebtedness; (iii) enter into any contract
or agreement (or series of related contracts or agreements) in excess of
$150,000 other than in the ordinary course of business, consistent with past
practice; (iv) authorize any capital commitment which is in excess of $75,000 or
capital expenditures which are, in the aggregate, in excess of $200,000; or (v)
enter into or amend any contract, agreement, commitment or arrangement with
respect to any matter set forth in this Section 5.2(e);
(f) mortgage, pledge or subject to Lien, any of its assets or
properties or agree to do so except for Permitted Liens;
(g) assume, guarantee or otherwise become responsible for the
obligations of any other Person or agree to so do;
(h) enter into or agree to enter into or terminate (prior to
the expiration date thereof) any employment agreement;
(i) increase the compensation or benefits payable or to become
payable to its officers or employees, except for increases in the ordinary
course of business and in accordance with past practices in salaries or wages of
employees of the Company or CN Ltd. who are not officers of the Company or CN
Ltd., or grant any severance or termination pay to, or enter into any severance
agreement with any director, officer or other employee of the Company or CN
Ltd., or establish, adopt, enter into or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any such
director, officer or employee;
(j) take any action, other than in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures (including, without limitation, procedures with respect to the
payment of accounts payable and collection of accounts receivables);
(k) make any material Tax election or settle or compromise any
material federal, state, local or foreign income Tax liability;
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(l) settle or compromise any pending or threatened suit,
action or claim which is material or which relates to any of the transactions
contemplated by this Agreement;
(m) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than (i) the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of liabilities reflected or reserved
against in the Balance Sheet or subsequently incurred in the ordinary course of
business and consistent with past practice and (ii) other claims, liabilities or
obligations (qualified as aforesaid) that in the aggregate do not exceed $50,000
or as to which the Company's or CN Ltd.'s failure to so pay, discharge or
satisfy could reasonably be expected to have a Material Adverse Effect;
(n) except in connection with the sale of the Company's or CN
Ltd.'s products in the ordinary course of business and consistent with past
practice, sell, assign, transfer, license, sublicense, pledge or otherwise
encumber any of the Intellectual Property Rights; or
(o) announce an intention, commit or agree to do any of the
foregoing.
5.3 Access; Documents; Supplemental Information. (a) From and
after the date hereof until the Closing, the Company shall afford, shall cause
CN Ltd. to afford and, with respect to clause (ii) below, shall use its
reasonable best efforts to cause the independent certified public accountants
for the Company to afford, (i) to the officers, independent certified public
accountants, counsel and other representatives of Acquisition and Lucent, upon
reasonable notice free and full access at all reasonable times to the
properties, books and records, including tax returns filed and those in the
process of being prepared by the Company and CN Ltd., and the right to consult
with the officers, employees, accountants, counsel and other representatives of
the Company and CN Ltd. in order that Acquisition and Lucent may have full
opportunity to make such investigations as they shall reasonably desire to make
of the operations, properties, business, financial condition and prospects of
the Company and CN Ltd., (ii) to the independent certified public accountants of
Acquisition and Lucent, free and full access at all reasonable times to the work
papers and other records of the accountants relating to the Company and CN Ltd.,
and (iii) to Acquisition and Lucent and their representatives, such additional
financial and operating data and other information as to the properties,
operations, business, financial condition and prospects of the Company and CN
Ltd. as Acquisition and Lucent shall from time to time reasonably require.
(b) From the date of this Agreement through and including the
Closing, Acquisition, Lucent and the Company agree to furnish to each other
copies of any notices, documents, requests, court papers, or other materials
received from any governmental agency or any other third party with respect to
the transactions contemplated by this Agreement, except where it is obvious from
such notice, document, request, court paper or other material that the other
party was already furnished with a copy thereof.
(c) The Company shall deliver to Lucent, without charge, the
following financial information (the "Supplemental Financial Information"): (i)
within 45 days after each fiscal quarter ending after the date hereof and prior
to the Effective Time, the unaudited consolidated
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balance sheet of the Company as of the end of such quarter and the unaudited
consolidated statements of income, stockholders' equity and cash flows of the
Company for such quarter and for the portion of the fiscal year then completed,
(ii) within 90 days after each fiscal year ending after the date hereof and
prior to the Effective Time, the audited consolidated balance sheet of the
Company and CN Ltd. as of the end of such year and the audited consolidated
statements of income, stockholders' equity and cash flows of the Company and CN
Ltd. for such year, in each case prepared in accordance with GAAP and certified
by PricewaterhouseCoopers, and (iii) promptly upon the reasonable request by
Lucent, such additional financial information as may be required in connection
with any filing by Lucent pursuant to the requirements of federal or state
securities laws. Such Supplemental Financial Information shall present fairly,
in all material respects, the financial position of the Company for the period
covered, subject in the case of unaudited financials to normal year-end
adjustments and the omission of footnotes.
(d) Lucent shall deliver to the Company, without charge a copy
of any filing made by Lucent with the SEC under the Exchange Act, including,
without limitation, any Form 10-Q, 8-K, 10-K or amendments thereto, not later
than five business days after the date of such filing with the SEC.
5.4 No Solicitation. (a) The Company shall not, nor shall it
permit CN Ltd. to, nor shall it authorize or permit any of its or CN Ltd.'s
directors, officers or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or CN Ltd. to,
directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing information), or take any other action
to facilitate, any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Acquisition Proposal or (ii)
participate in any discussions or negotiations regarding any Acquisition
Proposal. Notwithstanding the foregoing, if, notwithstanding compliance with the
preceding sentence, the Company receives a Superior Proposal, the Company may,
to the extent that its Board of Directors determines in good faith (based on the
advice of outside counsel) that such action would, in the absence of the
foregoing proscriptions, be required by its fiduciary duties, participate in
discussions regarding a Superior Proposal in order to be informed with respect
thereto in order to make any determination permitted pursuant to Section 5.4
(b)(i). In such event, the Company shall, no less than 48 hours prior to
participating in any such discussions, (i) inform Lucent of the material terms
and conditions of such Superior Proposal, including the identity of the person
making such Superior Proposal, (ii) inform Lucent of any discussions relating to
such Superior Proposal and (iii) keep Lucent fully informed of the status,
including any change to the details, of any such Superior Proposal.
Notwithstanding the foregoing, in connection with a possible Acquisition
Proposal, the Company may refer such third party to this Section 5.4 (if this
Agreement is then publicly available) or otherwise make a copy of this Section
5.4 available to such third party.
For purposes of this Agreement:
"Acquisition Proposal" means any proposal for a merger or
other business combination involving the Company or CN Ltd. or any proposal or
offer to acquire in any manner, directly or indirectly, an equity interest in
the Company or CN Ltd., any voting securities of the Company or CN Ltd. or a
substantial portion of the assets of the Company or
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CN Ltd. (other than sales of the Company's or CN Ltd.'s products in the ordinary
course of business consistent with past practice), other than the transactions
contemplated by this Agreement; and
"Superior Proposal" means any offer not solicited by the
Company made by a third party to consummate a tender offer, exchange offer,
merger, consolidation or similar transaction which would result in such third
party (or its shareholders) owning, directly or indirectly, more than 50% of the
shares of each class of Company Capital Stock then outstanding (or of the
surviving entity in a merger) or all or substantially all of the assets of the
Company and CN Ltd., taken together, and otherwise on terms which the Board of
Directors of the Company determines in good faith (based on the advice of a
financial advisor of nationally recognized reputation) to be reasonably likely
to obtain the Requisite Stockholder Approval and to provide consideration to the
holders of the Company Capital Stock with a greater value than the consideration
payable in the Merger.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) except as required by law as advised by counsel,
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Lucent, the approval or recommendation by such Board of Directors or
such committee of the Merger or this Agreement, (ii) approve or recommend, or
propose publicly to approve or recommend, any Acquisition Proposal or (iii)
approve or recommend, or propose to approve or recommend, or execute or enter
into, any letter of intent, agreement in principle, merger agreement,
acquisition agreement, option agreement or other similar agreement or propose
publicly or agree to do any of the foregoing (each, an "Acquisition Agreement")
related to any Acquisition Proposal.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.4, the Company shall promptly (and in
any event within 48 hours) advise Lucent orally and in writing of any request
for information or of any Acquisition Proposal, the material terms and
conditions of such request or Acquisition Proposal and the identity of the
Person making such request or Acquisition Proposal. The Company will keep Lucent
informed of the status and material terms and conditions (including amendments
or proposed amendments) of any such request or Acquisition Proposal.
(d) Nothing contained in this Section 5.4 shall prohibit the
Company from making any disclosure to the Company's stockholders if, in the good
faith judgment of the Board of Directors of the Company, after consultation with
outside counsel, failure so to disclose would be inconsistent with its
obligations under applicable law; provided, that, except as expressly permitted
by this Section 5.4, neither the Company nor its Board of Directors nor any
committee thereof shall withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to this Agreement or the Merger or approve or
recommend, or propose publicly to approve or recommend, an Acquisition Proposal.
5.5 Exemption from Registration; Other Actions. (a) The shares
of Lucent Common Stock to be issued in connection with the Merger will be issued
in a transaction exempt from registration under the Securities Act by reason of
Section 4(2) thereof (the "Private Placement Alternative"). Lucent shall use its
reasonable best efforts to prepare, file and cause to
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become effective, on or as promptly as practicable after the Effective Time, but
in no event shall such filing be later than ten business days following the
later to occur of (x) the Effective Time and (y) Lucent's receipt of information
necessary therefor, a registration statement on Form S-3 or such other form as
may be appropriate to be filed with the SEC by Lucent under the Securities Act
as Lucent and the Company agree (together with any amendments or supplements
thereto, whether prior to or after the effective date thereof, the "Registration
Statement") covering the public resale of such shares of Lucent Common Stock to
be issued in connection with the Merger, and Lucent shall use its reasonable
best efforts to keep the Registration Statement effective until the first
anniversary of the Closing Date (such anniversary date being referred to herein
as the "Termination Date"). Any such registration shall be subject to the
customary terms and conditions used in connection with resale prospectuses;
provided that if Lucent determines that sales under the Registration Statement
would require disclosure of non-public information material to Lucent at a time
when Lucent desires not to disclose such information, Lucent may, upon written
notice to the Company Stockholders, suspend on one occasion only and for a
period not to exceed 30 consecutive days the right of the Company Stockholders
to effect resales, pursuant to such Registration Statement, of such shares of
Lucent Common Stock issued in connection with the Merger, and Lucent agrees to
promptly notify the Company Stockholders prior to the expiration of such period
of the date on which they may again effect resales under the Registration
Statement (it being understood by the parties that in such event the Termination
Date shall be extended by the amount of time the Company Stockholders' ability
to use the Registration Statement was so suspended).
(b) If Lucent determines in the exercise of its reasonable
business judgment that the Private Placement Alternative is unavailable or
undesirable, then, as promptly as practicable after such determination, Lucent
and the Company shall prepare, and Lucent shall file with the SEC, a
registration statement on Form S-4 (or such other or successor form as shall be
appropriate) covering shares of Lucent Common Stock to be issued in connection
with the Merger (the "Form S-4 Alternative"), and Lucent shall use all
reasonable efforts to cause the Form S-4 to become effective as soon thereafter
as practicable. If Lucent chooses the Form S-4 Alternative pursuant to this
Section 5.5(b), then all references in this Agreement to "Registration
Statement" shall mean the registration statement on Form S-4 contemplated by
this Section 5.5(b).
(c) Each party hereto agrees, subject to applicable laws
relating to the exchange of information, promptly to furnish the other parties
hereto with copies of written communications (and memoranda setting forth the
substance of all oral communications) received by such party, or any of its
subsidiaries, affiliates or associates (as such terms are defined in Rule 12b-2
under the Exchange Act as in effect on the date hereof), from, or delivered by
any of the foregoing to, any governmental or regulatory authority, domestic or
foreign, relating to or in respect of the transactions contemplated under this
Agreement.
5.6 Company Stock Options; Warrant. (a) As soon as practicable
following the date of this Agreement, the Board of Directors of the Company (or,
if appropriate, any committee administering the 1998 Goldfish Stock Plan (the
"Company Stock Plan")) shall adopt such resolutions or take such other actions
as may be required to:
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(i) adjust the terms of all outstanding options to
purchase shares of Company Capital Stock under the Company
Stock Plan (the "Company Stock Options"), whether vested or
unvested, as necessary to provide that, at the Effective Time,
each Company Stock Option outstanding immediately prior to the
Effective Time shall be amended and converted into an option
to acquire, on the same terms and conditions as were
applicable under such Company Stock Option, the number of
shares of Lucent Common Stock (rounded down to the nearest
whole share) equal to (A) the number of shares of Company
Common Stock subject to such Company Stock Option immediately
prior to the Effective Time multiplied by (B) the Common Stock
Exchange Ratio, at an exercise price per share of Lucent
Common Stock (rounded to the nearest 1/100th of a whole cent)
equal to (x) the exercise price per share of such Company
Common Stock immediately prior to the Effective Time divided
by (y) the Common Stock Exchange Ratio (each Company Stock
Option as so adjusted, an "Adjusted Option"); and
(ii) make such other changes to the Company Stock
Plan as the Company and Lucent may agree are appropriate to
give effect to the Merger, including as provided in Section
5.7.
(b) As soon as practicable after the Effective Time, Lucent
shall deliver to the holders of Company Stock Options appropriate notices (the
"Company Stock Option Notices") setting forth (i) such holders' rights pursuant
to the respective Company Stock Plan and the agreements evidencing the grants of
such Company Stock Options and that such Company Stock Options and agreements
shall be assumed by Lucent and shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 5.6 after giving
effect to the Merger) and (ii) the procedures for the exercise of the Adjusted
Options. The term, exercisability, vesting schedule (including any acceleration
provisions therein), status as an "incentive stock option" under Section 422 of
the Code, as applicable, and all of the other terms of the Company Stock Options
shall otherwise remain unchanged.
(c) A holder of an Adjusted Option may exercise such Adjusted
Option in whole or in part by (i) following the exercise procedures to be
delivered by Lucent as set forth in the Company Stock Option Notice and (ii)
concurrently delivering to Lucent the consideration therefor and any applicable
withholding taxes.
(d) Except as otherwise contemplated by this Section 5.6 and
except to the extent required under the respective terms of the Company Stock
Options all restrictions or limitations on transfer and vesting with respect to
Company Stock Options awarded under the Company Stock Plan or any other plan,
program or arrangement of the Company, to the extent that such restrictions or
limitations shall not have already lapsed, shall remain in full force and effect
with respect to such options after giving effect to the Merger and the
assumption by Lucent as set forth above.
(e) As soon as practicable following the date of this
Agreement, each Restricted Stock Agreement set forth on Schedule 3.16(c) (other
than the founders' Restricted Stock
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Agreements which shall accelerate at the Effective Time) shall be assumed by
Lucent and, in accordance with Section 1.5(c), each share of restricted Company
Common Stock which is outstanding and unvested thereunder at or immediately
prior to the Effective Time pursuant to the Company Stock Plan or any Restricted
Stock Agreement shall be converted into the right to receive the Exchange Ratio
(such number as adjusted in accordance with Section 1.6) including the Right,
subject to the same restrictions and vesting as set forth therein (the
"Substitute Restricted Stock").
(f) No later than the later to occur of (x) 30 days after the
Effective Time and (y) Lucent's receipt of the information necessary therefor,
Lucent shall prepare and file with the SEC a registration statement on Form S-8
(or another appropriate form) registering a number of shares subject to the
Adjusted Options. Such registration statement shall be kept effective (and the
current status of the prospectus required thereby shall be maintained in
accordance with the relevant requirements of the Securities Act and the Exchange
Act) at least for so long as any Adjusted Options remain outstanding.
(g) Prior to the Effective Time, the Company shall take all
actions to receive from each holder of the Warrants an agreement that, as of the
Effective Time, the Warrants shall be converted into a right of such holder to
receive from the Exchange Agent the consideration set forth in the next two
sentences at the same time that such holder of Company Capital Stock is entitled
to receive shares of Lucent Common Stock in connection with the Merger. The
holder of the Common Warrant shall be entitled to receive from the Exchange
Agent in respect of the shares of Company Common Stock to be issued upon the
exercise of the Common Warrant, the number of shares of Lucent Common Stock
(rounded down to the nearest whole share) equal to the number of shares of
Company Common Stock subject to such Common Warrant immediately prior to the
Effective Time multiplied by 2.12386 (the "Common Warrant Exchange Ratio").
Lucent shall pay cash (without interest) to holder of the Common Warrant in lieu
of issuing fractional shares of Lucent Common Stock in an amount, rounded to the
nearest whole cent, computed in accordance with the formula set forth in Section
1.8.
5.7 Company Stock Plan. At the Effective Time, by virtue of
the Merger, the Company Stock Plan and the Company Stock Options granted
thereunder shall be assumed by Lucent, with the result that all obligations of
the Company under the Company Stock Plan, including with respect to awards
outstanding at the Effective Time under the Company Stock Plan, shall be
obligations of Lucent following the Effective Time; provided, that in the case
of any Company Stock Option to which Section 421 of the Code applies by reason
of its qualification under Section 422 of the Code, the option price, number of
shares purchasable pursuant to such Company Stock Option and the terms and
conditions of exercise of such Company Stock Option shall be determined in order
to comply with Section 424 of the Code. Prior to the Effective Time, Lucent
shall take all necessary actions (including, if required to comply with Section
162(m) of the Code (and the regulations thereunder) or applicable law or rule of
the NYSE, obtaining the approval of its shareholders at the next regularly
scheduled annual meeting of Lucent following the Effective Time) for the
assumption of the Company Stock Plan, including the reservation, issuance and
listing of Lucent Common Stock in a number at least equal to the number of
shares of Lucent Common Stock that will be subject to the Adjusted Options.
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5.8 Employee Benefit Plans; Existing Agreement. (a) As soon as
practicable after the Effective Time (the "Benefits Date"), Lucent shall
provide, or cause to be provided, employee benefit plans, programs and
arrangements to employees of the Company that are the same as those made
generally available to similarly situated employees of Lucent's optical networks
group by Lucent after June 1, 2000. From the Effective Time to the Benefits Date
(which the parties acknowledge may occur on different dates with respect to
different plans, programs or arrangements of the Company) (the "Continuation
Period"), Lucent shall provide, or cause to be provided, the employee benefit
plans, programs and arrangements of the Company provided to employees of the
Company as of the date hereof.
(b) With respect to each benefit plan, program, practice,
policy or arrangement maintained by Lucent (the "Lucent Plans") in which
employees of the Company subsequently participate, for purposes of determining
vesting and entitlement to benefits, including for severance benefits and
vacation entitlement (but not for accrual of pension benefits), service with the
Company (or predecessor employers to the extent the Company provides past
service credit) shall be treated as service with Lucent; provided, that such
service shall not be recognized to the extent that such recognition would result
in a duplication of benefits. Such service also shall apply for purposes of
satisfying any waiting periods, evidence of insurability requirements, or the
application of any pre-existing condition limitations. Each Lucent Plan shall
waive pre-existing condition limitations to the same extent waived under the
applicable Benefit Plan. Such employees shall be given credit for amounts paid
under a corresponding Benefit Plan during the same period for purposes of
applying deductibles, copayments and out-of-pocket maximums as though such
amounts had been paid in accordance with the terms and conditions of the Lucent
Plan for the plan year in which the Effective Time occurs.
5.9 Indemnification. (a) From and after the Effective Time,
Lucent shall, or shall cause the Surviving Corporation to, fulfill and honor in
all respects the obligations of the Company and CN Ltd. to indemnify each Person
who is or was a director or officer (an "Indemnified Party") of the Company or
CN Ltd. pursuant to any indemnifications provision of the Company's Certificate
of Incorporation or By-laws, or CN Ltd.'s Memorandum of Association, as each is
in effect on the date hereof.
(b) For a period of six years after the Effective Time, Lucent
shall use its reasonable best efforts to cause to be maintained officers' and
directors' liability insurance with respect to the Indemnified Parties of the
Company and CN Ltd. covering acts or omissions by any such Person occurring
prior to the Effective Time under customary terms and conditions.
(c) This Section 5.9 shall survive the closing of all the
transactions contemplated hereby, is intended to benefit the Indemnified Parties
and their respective heirs and personal representative (each of which shall be
entitled to enforce this Section 5.9 against Lucent and the Surviving
Corporation, as the case may be, as a third-party beneficiary of this
Agreement).
5.10 Stock Exchange Listing. Lucent shall use all reasonable
best efforts to list on the NYSE, upon official notice of issuance, the shares
of Lucent Common Stock to be issued in connection with the Merger and upon
exercise of Adjusted Options.
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5.11 Affiliates. As soon as practicable after the date hereof,
the Company shall deliver to Lucent a letter identifying all Persons who are, at
the time this Agreement is submitted for adoption by the stockholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use its reasonable best efforts to cause each
such Person to deliver to Lucent as of the Closing Date, a written agreement
substantially in the form attached as Exhibit B hereto.
5.12 Notification of Certain Matters. The Company shall give
prompt notice to Lucent, and Lucent shall give prompt notice to the Company, of
(a) the occurrence, or non-occurrence, of any event which would be likely to
cause (i) any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect or (ii) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(b) any failure of the Company, Lucent or Acquisition, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder; provided that the delivery of any notice pursuant
to this Section 5.12 shall not limit or otherwise affect the remedies available
to the party receiving such notice.
5.13 Tax Returns; Cooperation. The Company on the one hand and
Lucent on the other will cooperate with each other and provide such information
as any party may require in order to file any return to determine Tax liability
or a right to a Tax refund or to conduct a Tax audit or other Tax proceeding.
Such cooperation shall include, but not be limited to, making employees
available on a mutually convenient basis to explain any documents or information
provided hereunder or otherwise as required in the conduct of any audit or other
proceeding.
5.14 Reorganization. Each of Lucent and the Company shall,
both before and after the Closing Date, use its reasonable best efforts to cause
the business combination of the Merger to be qualified as a reorganization under
Section 368(a) of the Code.
5.15 Actions by the Parties. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties hereto will use its
reasonable best efforts to take or cause to be taken all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable law
and regulations to consummate and make effective in the most expeditious manner
practicable, the transactions contemplated by this Agreement including (i) the
obtaining of all necessary actions and non-actions, waivers and consents, if
any, from any governmental agency or authority and the making of all necessary
registrations and filings (including without limitation (x) the filing of a
premerger notification and report form by Lucent under the HSR Act and any
applicable filings and approvals under similar foreign antitrust laws and
regulation and (y) filings with the appropriate Israeli governmental authorities
of the information required to obtain the Israeli Regulatory Approvals), and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by any governmental agency or
authority; (ii) the obtaining of all necessary consents, approvals or waivers
from any other Person; (iii) the defending of any claim, investigation, action,
suit or other legal proceeding, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby; and
(iv) the execution of additional instruments necessary to consummate the
transactions contemplated by this Agreement. Each party will promptly consult
with the other and provide necessary information
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(including copies thereof) with respect to all filings made by such party with
the any agency or authority in connection with this Agreement and the
transactions contemplated hereby.
5.16 CN Ltd. Share Purchase. Prior to the Effective Time, the
Company shall purchase for nominal consideration any CN Ltd. Shares not owned by
the Company.
6. Conditions Precedent.
6.1 Conditions Precedent to Each Party's Obligation to Effect
the Merger. The respective obligations of each party hereto to effect the Merger
shall be subject to the fulfillment or satisfaction, prior to or on the Closing
Date of the following conditions:
(a) Stockholder Approval. The Merger shall have been duly
approved by the requisite vote of the outstanding shares of Company Capital
Stock and the Acquisition Common Stock entitled to vote thereon in accordance
with the DGCL and the of each of the Company and Acquisition, respectively. A
majority of the outstanding shares of each of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock,
voting as a separate class on an as-converted basis, shall have agreed to waive
any rights to receive any liquidation premium payable in cash in lieu of shares
of Lucent Common Stock.
(b) Approvals. All authorizations, consents (including without
limitation any approvals under the HSR Act or similar foreign laws and the
consent of the applicable Israeli authorities with respect to the Israeli
Regulatory Authorities), orders, declarations or approvals of, or filings with,
or terminations or expirations of waiting periods imposed by, any governmental
or regulatory authority, domestic or foreign, which the failure to obtain, make
or occur would have the effect of making the Merger or any of the transactions
contemplated hereby illegal or would have a Material Adverse Effect on Lucent or
the Company (as Surviving Corporation), assuming the Merger had taken place,
shall have been obtained, made or occurred.
(c) No Litigation. No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued
by any court or other governmental entity of competent jurisdiction or other
legal restraint or prohibition (collectively, "Restraints") shall be in effect
with respect to the transactions contemplated hereby, and there shall not be
pending any suit, action or proceeding by any governmental entity (i) preventing
the consummation of the Merger or (ii) which otherwise is reasonably likely to
have a Material Adverse Effect on the Company or Lucent, as applicable;
provided, that each of the parties shall have used its reasonable best efforts
to prevent the entry of any such Restraints and to appeal as promptly as
reasonably possible any such Restraints that may be entered.
(d) Escrow Agreement. Each of Lucent, the Company, the Escrow
Agent and the Company Stockholders' Representative shall have entered into the
Escrow Agreement substantially in the form of Exhibit C hereto (the "Escrow
Agreement").
(e) Supplemental Escrow Agreement. Each of Lucent, the
Company, the Supplemental Escrow Agent and the Key Founders shall have entered
into the Supplemental Escrow Agreement substantially in the form of Exhibit D
hereto (the "Supplemental Escrow Agreement").
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(f) Representation Letters. Each of the Company and Lucent
shall have executed and delivered a letter of representation relating to certain
tax matters in form and substance reasonably acceptable to the other party.
(g) Affiliate Letters. The Company and its Affiliates shall
have executed and delivered a letter relating to Rule 145 under the Securities
Act substantially in the form of Exhibit B hereto, and such letter shall be true
and correct in all material respects and in full force and effect.
(h) Stock Exchange Listing. The shares of Lucent Common Stock
issued in accordance with the Merger and issuable upon exercise of the Adjusted
Options and the Warrants shall have been authorized for listing on the NYSE,
subject to official notice of issuance.
(i) Registration Statement. If Lucent utilizes the Form S-4
Alternative, the Registration Statement shall have become effective in
accordance with the provisions of the Securities Act. No stop order suspending
the effectiveness of the Registration Statement shall have been issued by the
SEC and no proceedings for that purpose shall have been initiated or, to the
knowledge of Lucent or the Company, threatened by the SEC.
6.2 Conditions Precedent to Obligations of Acquisition and
Lucent. All obligations of Acquisition and Lucent under this Agreement are
subject to the fulfillment or satisfaction, prior to or on the Closing Date, of
each of the following conditions precedent:
(a) Performance of Obligations; Representations and
Warranties. The Company shall have performed and complied in all material
respects with all agreements and conditions contained in this Agreement that are
required to be performed or complied with by it prior to or at the Closing. Each
of the Company's representations and warranties contained in Section 3 of this
Agreement to the extent it is qualified by Material Adverse Effect or
materiality shall be true and correct, and each of the Company's representations
and warranties to the extent it is not so qualified by Material Adverse Effect
or materiality shall be true and correct in all material respects, in each case,
on and as of the Closing with the same effect as though such representations and
warranties were made on and as of the Closing, except for changes permitted by
this Agreement and except to the extent that any representations and warranties
expressly relate to an earlier date, in which case such representations and
warranties shall be as of such earlier date. Lucent and Acquisition shall have
received a certificate dated the Closing Date and signed by the Chairman,
President or a Vice-President of the Company, certifying that, the conditions
specified in this Section 6.2(a) and Section 6.2(d) have been satisfied.
(b) Opinions of Counsel. Lucent and Acquisition shall have
received the favorable written opinions dated the Closing Date of Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP, counsel to the Company, and
Tulchinsky Stern & Co., Israeli counsel to the Company, each in form
satisfactory to Lucent and Acquisition.
(c) Officer and Director Terminations. In accordance with
Section 1.4, each director and officer of the Company shall cease to act in such
capacity.
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(d) No Material Adverse Change. There shall have been no
material adverse change in the assets, business, financial condition or
operations of the Company or CN Ltd. and no event or events shall have occurred
that could reasonably be expected to have a Material Adverse Effect (other than
as a result of (i) general economic conditions, (ii) business and economic
conditions generally affecting the optical networks industry, (iii) liabilities
incurred in connection with this Agreement or the transactions contemplated
hereby and (iv) the announcement of the transactions contemplated hereby).
(e) Consents. The Company shall have received all necessary
consents, in form and substance reasonably satisfactory to Lucent and
Acquisition, from the other parties to each contract, lease or agreement set
forth on Schedule 3.10, except where the failure to receive such consent would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
(f) Non-Competition and Non-Disclosure Agreements. Each of the
persons on Schedule 6.2(f) shall have entered into Non-Competition and
Non-Disclosure Agreements with the Surviving Corporation, each substantially in
the form of Exhibit E hereto, and such agreements shall be in full force and
effect.
(g) Real Property Certificate. Lucent shall have received a
certificate from the Company certifying that the Company has never been and is
not a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code pursuant to Treas. Reg. Sec. 1.897-2(h) and Treas.
Reg. Sec. 1.1445-2(c)(3)(i) at the Closing.
(h) Voting Agreements and Right of First Refusal and Co-Sale
Agreements . Each of the voting agreements and right of first refusal and
co-sale agreements entered into by the Company Stockholders (including any such
agreements listed on Schedule 3.2(b)) shall have been terminated in accordance
with the terms thereof or by the parties thereto.
(i) Investors' Rights Agreements. Each of the investors'
rights agreements entered into by the Company and other parties thereto
(including any such agreements listed on Schedule 3.2(b)) shall have been
terminated in accordance with the terms thereof or by the parties thereto.
(j) Stockholder Representation Letters. Lucent shall have
received a letter, dated as of the Closing Date, from each Company Stockholder
relating to certain securities matters in form and substance reasonably
acceptable to Lucent.
6.3 Conditions Precedent to the Company's Obligations. All
obligations of the Company under this Agreement are subject to the fulfillment
or satisfaction, prior to or on the Closing Date, of each of the following
conditions precedent:
(a) Performance of Obligations; Representations and
Warranties. Acquisition and Lucent shall have performed and complied in all
material respects with all agreements and conditions contained in this Agreement
that are required to be performed or complied with by them prior to or at the
Closing. Each of the representations and warranties of Acquisition and
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Lucent contained in Section 4 of this Agreement to the extent it is qualified by
Material Adverse Effect shall be true and correct and each of the
representations and warranties of Acquisition and Lucent to the extent it is not
so qualified by Material Adverse Effect shall be true and correct in all
material respects, in each case, on and as of the Closing with the same effect
as though such representations and warranties were made on and as of the
Closing, except for changes permitted by this Agreement and except to the extent
that such representations and warranties expressly relate to an earlier date, in
which case such representations and warranties shall be as of such earlier date.
The Company shall have received certificates dated the Closing Date and signed
by the President or a Vice-President of Acquisition and an authorized signatory
of Lucent, certifying that the conditions specified in this Section 6.3(a) and
Section 6.3(c) have been satisfied.
(b) Opinions of Counsel. The Company shall have received the
favorable written opinion dated the Closing Date of Sidley & Austin, special
counsel to Acquisition and Lucent, and internal counsel to Acquisition and
Lucent, each in form satisfactory to the Company. Each of the Company and Lucent
shall have received a written opinion from their respective counsel to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, which opinions shall be substantially identical in
substance. In preparing the Company and Lucent tax opinions, counsel may rely on
reasonable assumptions and may also rely on (and to the extent reasonably
required, the parties and Company's stockholders shall make) reasonable
representations related thereto in letters addressed to the Company and Lucent
and in the forms satisfactory to legal counsel for both the Company and Lucent.
(c) No Material Adverse Change. There shall have been no
material adverse change in the assets, business, financial condition or
operations of Lucent and no event or events shall have occurred that could
reasonably be expected to have a Material Adverse Effect (other than (i)
conditions generally affecting the optical networks industry or (ii) resulting
from the announcement of the Merger) on Lucent.
6.4 Frustration of Closing Conditions. None of the Company,
Lucent or Acquisition may rely on the failure of any condition set forth in
Sections 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such failure
was caused by such party's failure to use reasonable efforts to consummate the
Merger and the other transactions contemplated by this Agreement, as required by
and subject to Section 5.15
7. Survival of Representation and Warranties.
7.1 Representations and Warranties. The representations and
warranties of the Company contained in this Agreement (including the schedules
to the Agreement which are hereby incorporated by reference) or in any
instrument delivered pursuant to this Agreement shall survive for 12 months
following the Effective Time. This Section shall not limit any claim for fraud
or any covenant or agreement by the parties which contemplates performance after
the Effective Time.
8. Indemnification.
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8.1 Escrow Shares. As soon as practicable after the Closing
Date, (i) 10% of the total number of shares of Lucent Common Stock to be issued
in exchange for the Company Capital Stock of the Company Stockholders other than
the Key Founders and (ii) 10% of the total number of shares of Lucent Common
Stock to be issued in exchange for the Company Capital Stock of the Key Founders
(collectively, the "Escrow Fund"), shall be deposited with The Bank of New York
(or another institution selected by Lucent), as escrow agent (the "Escrow
Agent"), such deposit to be governed by the terms set forth herein and in the
Escrow Agreement. The Escrow Fund shall be the sole and exclusive source
available to compensate Lucent for the indemnification obligations of each
holder of Company Capital Stock (each, a "Company Stockholder" and collectively,
the "Company Stockholders") under Section 8.2 except that Lucent may elect not
to have recourse to the Escrow Fund for any claim of fraud.
8.2 General Indemnification. (a) Subject to the limitations
set forth in this Section 8, the Company Stockholders will jointly and severally
indemnify and hold harmless Lucent and each Person, if any, who controls, may
control or is controlled by Lucent within the meaning of the Securities Act and
their respective officers, directors, employees, agents and advisors (each such
indemnitee being referred to herein as an "Indemnified Person"), from and
against any and all losses, costs, damages, liabilities, obligations,
impositions, inspections, assessments, fines, deficiencies and expenses arising
from claims, demands, actions, causes of action, including, without limitation,
reasonable legal fees (collectively, "Damages"), arising out of (i) any
inaccuracy in any representation or warranty made by the Company in this
Agreement or in any exhibit or schedule to this Agreement, and (ii) any breach
or default by the Company of any of the covenants or agreements given or made by
it in this Agreement or any exhibit or schedule to this Agreement.
(b) Lucent and the Company Stockholders each acknowledge that
such Damages, if any, would relate to unresolved contingencies existing at the
Closing Date, which if resolved at the Closing Date would have led to a
reduction in the total consideration that Lucent would have agreed to pay in
connection with the transactions contemplated hereby.
8.3 Damages Threshold; Damages Cap. (a) Notwithstanding
anything to the contrary contained in this Agreement, solely with respect to any
claim by Lucent for indemnification under Section 8.2(a)(i), Lucent may not seek
indemnification with respect to any claim for Damages until the aggregate amount
of all Damages for which Lucent is seeking indemnification under Section
8.2(a)(i) equals or exceeds $2,000,000 (the "Threshold"), whereupon Lucent shall
be entitled to seek indemnification with respect to all such Damages that exceed
the Threshold.
(b) In determining the amount of any Damage for which Lucent
may seek indemnification under Section 8.2(a)(i) or Section 8.2(a)(ii), but not
in determining whether there has been a breach of any representation, warranty
or covenant, any materiality standard contained in a representation, warranty or
covenant shall be disregarded.
(c) The liability of the Company Stockholders to Lucent for
all Damages for which indemnification is provided hereunder shall not exceed the
Escrow Fund, except for any claims of fraud.
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8.4 Escrow Period; Release of Escrow Fund. The Escrow Fund
shall commence on the Closing Date and terminate on the first anniversary of the
Closing Date (the "Escrow Period"). On such first anniversary, all shares of
Lucent Common Stock then remaining in the Escrow Fund shall be released;
provided that the amount of any claim made pursuant to Section 8.5 during the
Escrow Period shall be withheld and remain in the Escrow Fund pending resolution
of such claim; provided further that the number of shares of Lucent Common Stock
in the Escrow Fund which is necessary to satisfy any unsatisfied claims
specified in any Lucent Notice theretofore delivered to the Escrow Agent prior
to the termination of the Escrow Period with respect to facts and circumstances
existing prior to the expiration of the Escrow Period, shall remain in the
Escrow Fund until such claims have been resolved. Any portion of the Escrow Fund
contributed under Section 8.1 (other than shares released to the Supplemental
Escrow Agent pursuant to the terms of the Supplemental Escrow Agreement) for
which there is no claim pursuant to this Section 8 shall be promptly distributed
by the Escrow Agent to the Company Stockholders' Representative for distribution
by the Escrow Agent to the Company Stockholders in accordance with each Company
Stockholder's percentage of the Escrow Fund as set forth in the Escrow
Agreement.
8.5 Claims Upon Escrow Fund. Subject to the provisions of this
Section 8, Lucent shall make claims upon the Escrow Fund by delivery to the
Escrow Agent on or before the last day of the Escrow Period of a notice signed
by an authorized representative of Lucent (a "Lucent Notice") specifying in
reasonable detail the individual items of Damages for which indemnification is
being sought, the date each such item was paid, or properly accrued or arose,
including any claim (contingent or otherwise) relating to Taxes, and the nature
of the misrepresentation, breach of warranty or claim to which such item is
related. Lucent shall, concurrently with the sending of any Lucent Notice to the
Escrow Agent, provide a copy of such Lucent Notice to the Company Stockholders'
Representative. Within 20 days after the receipt of any Lucent Notice, the
Company Stockholders' Representative, on behalf of the Company Stockholders,
shall deliver a notice to Lucent and the Escrow Agent (each, a "Company
Stockholders' Representative Notice") certifying that the Company Stockholders
either agree with the Lucent Notice or object to the Lucent Notice. If the
Company Stockholders agree with the Lucent Notice, the Escrow Agent shall
deliver to Lucent out of the Escrow Fund, as promptly as practicable after
receipt of the Company Stockholders' Representative Notice, the number of Shares
held in the Escrow Fund having a fair market value on the Closing Date equal to
such Damages. If the Company Stockholders' Representative objects to the Lucent
Notice within the 20-day period after receipt of the Lucent Notice, Lucent and
the Company Stockholders' Representative shall resolve such dispute in
accordance with Section 8.6. If the Company Stockholders' Representative fails
to deliver a Company Stockholders' Representative Notice within such 20-day
period, the Company Stockholders' Representative shall be deemed to have
consented to the Lucent Notice and given a Company Stockholders' Representative
Notice to Lucent and the Escrow Agent, and the Escrow Agent shall deliver to
Lucent out of the Escrow Fund, as promptly as practicable after such 20-day
period, the number of Shares held in the Escrow Fund having a fair market value
on the Closing Date equal to such Damages.
8.6 Objections to Claims. (a) If the Company Stockholders'
Representative shall object to a Lucent Notice within the twenty-day period
after receipt thereof, then Lucent and the Company Stockholders' Representative
shall use their good faith efforts to resolve such
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dispute. If Lucent and the Company Stockholders' Representative resolve such
dispute, the parties shall deliver a written notice to the Escrow Agent
directing the delivery of the Escrow Fund based upon such resolution.
(b) If Lucent and the Company Stockholders' Representative are
unable to resolve such dispute within 30 days after the Company Stockholders'
Representative objects to such Lucent Notice, either Lucent or the Company
Stockholders' Representative may, by written notice to the other and the Escrow
Agent, demand arbitration of such dispute. Any such arbitration shall be
conducted by a dispute service ("Arbitration Service") as shall be reasonably
acceptable to Lucent and the Company Stockholders' Representative. The
Arbitration Service shall select one arbitrator reasonably acceptable to Lucent
and the Company Stockholders' Representative who shall be expert in the area of
development and production of optical network products. The decision by the
arbitrator shall be binding and conclusive and, notwithstanding any other
provisions of this Section 8, the Escrow Agent shall be entitled to act in
accordance with such decision and make delivery of the Escrow Fund in accordance
therewith.
(c) The arbitration shall be held in New York, New York. The
costs of any such arbitration shall be borne one-half for the account of Lucent
and one-half by the Company Stockholders. Judgment upon any award rendered by
the arbitrator may be entered in any court of competent jurisdiction.
8.7 Third-Party Claims. In the event Lucent becomes aware of a
third-party claim which Lucent believes may result in a demand pursuant to this
Section 8, Lucent shall promptly notify the Company Stockholders' Representative
of such claim, and the Company Stockholders' Representative shall be entitled,
at the Company Stockholders' expense (out of the Escrow Fund to the extent
available after all claims have been satisfied and shares released, but limited
to the shares described in clause (i) of the first sentence of Section 8.1), to
participate in any defense of such claim; provided that Lucent shall control
such defense, and shall have the right with the consent of the Company
Stockholders' Representative (which consent shall not be unreasonably withheld)
to settle any such claim (it being understood that no such consent of the
Company Stockholders' Representative shall be required where the third-party
claim, which Lucent proposes to settle, involves the business reputation of
Lucent or its Affiliates in any material adverse respect, or the possible
criminal liability of Lucent or its Affiliates or any of their respective
officers, directors or employees). In the event that the Company Stockholders'
Representative has consented to any such settlement, the Company Stockholders
shall have no power or authority to object under any provision of this Section 8
to the amount of any claim by Lucent for indemnity with respect to such
settlement.
8.8 Company Stockholders' Representative. (a) JVP Corporation
is hereby appointed as representatives (the "Company Stockholders'
Representative") for and on behalf of the Company Stockholders to take all
actions necessary or appropriate in the judgment of the Company Stockholders'
Representative for the accomplishment of the terms of this Agreement. The
holders of a majority in interest of the shares of Lucent Common Stock held in
the Escrow Fund may replace the Company Stockholders' Representative upon not
less than 10 days' prior written notice to Lucent. No bond shall be required of
the Company Stockholders' Representative and the Company Stockholders'
Representative shall receive no compensation for
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his services; provided that actual and reasonable expenses incurred by the
Company Stockholders' Representative in connection with the performance of his
duties under Sections 8.6 and 8.7 shall be reimbursable out of the Escrow Fund
to the extent available after the release of shares, but limited to the shares
described in clause (i) of the first sentence of Section 8.1. Notices of
communications to or from the Company Stockholders' Representative shall
constitute notice to or from each of the Company Stockholders. If JVP
Corporation is no longer able or willing to serve as the Company Stockholders'
Representative, a new Company Stockholders' Representative shall be chosen by
Company Stockholders holding a majority of the shares of Lucent Common Stock
issued in connection with the Merger.
(b) The Company Stockholders' Representative shall not be
liable for any act done or omitted in such capacity while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted pursuant
to the advise of counsel shall be conclusive evidence of such good faith. The
Company Stockholders shall severally indemnify the Company Stockholders'
Representative and hold him harmless against any loss, liability or expense
incurred without gross negligence or bad faith on the part of the Company
Stockholders' Representative and arising out of or in connection with the
acceptance or administration of his duties hereunder.
(c) Any decision, act, consent or instruction of the Company
Stockholders' Representative shall constitute a decision of all and shall be
final, binding and conclusive upon every Company Stockholder and the Escrow
Agent and Lucent may rely upon any decision, act, consent or instruction of each
and every Company Stockholder. The Escrow Agent and Lucent are hereby relieved
from any liability to any person for acts done by them in accordance with such
decision, act, consent or instruction of the Company Stockholders'
Representative.
9. Brokers' and Finders' Fees.
9.1 Company. The Company represents and warrants to
Acquisition and Lucent that, except as set forth in Schedule 9.1, no broker,
investment banker or financial advisor is entitled to receive a brokerage fee,
financing commission or other commission from the Company in respect of the
execution of this Agreement or the consummation of the transactions contemplated
hereby. The Company agrees that if the transactions contemplated by this
Agreement are not consummated (other than as a result of a breach or default by
Lucent or Acquisition), it shall indemnify and hold Acquisition and Lucent
harmless against any and all claims, losses, liabilities, costs or expenses
which may be asserted against them as a result of the Company's or any of its
Affiliates' dealings, arrangements or agreements with any such Person.
9.2 Acquisition and Lucent. Acquisition and Lucent represent
and warrant to the Company that no broker, investment banker or financial
advisor is entitled to receive any brokerage fee, financing commission or other
commission from Lucent in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby. Acquisition and Lucent
agree that if the transactions contemplated hereby are not consummated (other
than as a result of a breach or default by the Company), they shall jointly and
severally indemnify and hold the Company harmless against any and all claims,
losses, liabilities, costs or
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expenses which may be asserted against them, as a result of Acquisition's or
Lucent's or any of their respective Affiliates' dealings, arrangements or
agreements with any such Person.
10. Expenses; Taxes. Lucent and the Company shall each pay its own
expenses incidental to the preparation of this Agreement, the carrying out of
the provisions of this Agreement and the consummation of the transactions
contemplated hereby, whether or not the Merger is consummated. The following
fees and taxes shall be shared evenly by Lucent and the Company: (i) any fees
payable in respect of pre-merger notification and report forms under the HSR Act
and for any filing necessary for Israeli Regulatory Approvals, and (ii) any
sales, use, stamp or transfer taxes, and any other filing or recording fees, if
any, which may be payable with respect to the consummation of the transactions
contemplated hereby.
11. Press Releases. Except as required by law or Lucent's listing
agreement with the New York Stock Exchange, Lucent, Acquisition and the Company
shall not issue any press release or otherwise make public any information with
respect to this Agreement nor the transactions contemplated hereby, prior to the
Closing, without the prior written consent of the other parties to this
Agreement.
12. Contents of Agreement; Parties in Interest; etc. This Agreement and
the agreements referred to or contemplated herein and the letter agreement
between Lucent and the Company concerning confidentiality (the "Confidentiality
Agreement") set forth the entire understanding of the parties hereto with
respect to the transactions contemplated hereby, and, except as set forth in
this Agreement, such other agreements and the Exhibits hereto and the
Confidentiality Agreement, there are no representations or warranties, express
or implied, made by any party to this Agreement with respect to the subject
matter of this Agreement and the Confidentiality Agreement. Except for the
matters set forth in the Confidentiality Agreement, any and all previous
agreements and understandings between or among the parties regarding the subject
matter hereof, whether written or oral, are superseded by this Agreement and the
agreements referred to or contemplated herein. All statements contained in
schedules, exhibits, certificates and other instruments attached hereto shall be
deemed representations and warranties (or exceptions thereto) by the Company,
Acquisition or Lucent, as the case may be.
13. Assignment and Binding Effect. This Agreement may not be assigned
by either party hereto without the prior written consent of the other parties;
provided, that Acquisition may assign its rights and obligations under this
Agreement to any directly or indirectly wholly-owned Subsidiary of Lucent, upon
written notice to the Company if the assignee shall assume the obligations of
Acquisition hereunder and Lucent shall remain liable for its obligations
hereunder. All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
14. Termination. This Agreement may be terminated, and the Merger may
be abandoned at any time prior to the Effective Time whether before or after the
approval and adoption of this Agreement and the transactions contemplated hereby
by the stockholders of the Company or the stockholders of Acquisition:
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(a) by the agreement of each of the Boards of Directors of
Lucent, Acquisition and the Company;
(b) by Lucent, Acquisition or the Company if:
(i) if Lucent utilizes the Private Placement Alternative, the
Effective Time shall not have occurred by September 30, 2000; provided that the
right to terminate this Agreement under this Section 14(b)(i) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
(ii) if Lucent utilizes the Form S-4 Alternative, the
Effective Time shall not have occurred by November 30, 2000; provided that the
right to terminate this Agreement under this Section 14(b)(ii) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date; or
(iii) any court of competent jurisdiction in the United States
or other United States governmental authority shall have issued an order,
decree, ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable;
(c) by the Company, in the event Lucent or Acquisition
materially breaches its obligations under this Agreement, unless such breach is
cured within 30 days after notice to Lucent by the Company; or
(d) by Lucent or Acquisition, in the event the Company
materially breaches its obligations under this Agreement unless such breach is
cured within 30 days after notice by Lucent or Acquisition.
15. Definitions. As used in this Agreement the terms set forth
below shall have the following meanings:
(a) "Affiliate" of a Person shall mean any other Person who
(i) directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, such Person or (ii) owns more
than 5% of the capital stock or equity interest in such Person. "Control" means
the possession of the power, directly or indirectly, to direct or cause the
direction of the management and policies of a Person whether through the
ownership of voting securities, by contract or otherwise.
(b) "Benefit Plan" shall mean any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical, fringe benefit or other
plan, arrangement or understanding (whether or not legally binding) providing
material benefits to any current or former employee, officer or director of the
Company or CN Ltd.
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(c) "Best Knowledge" in respect of any representation and
warranty of the Company set forth in this Agreement shall mean (i) the actual
knowledge of Brian Attard, Robert Barron, Rafi Gidron, Steve Korn, Yair Oren,
Orni Petruschka, Steve Roberts and Yossi Schussman (the "Knowledgeable
Officers") of the Company and (ii) the constructive knowledge of the
Knowledgeable Officers of the Company to the extent such knowledge would have
been obtained by their due inquiry of the employees charged with responsibility
for the particular matter which is the subject of such representation or
warranty.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Common Warrant" shall mean the outstanding warrant to
purchase 100,000 shares of Company Common Stock issued to (1996)
Tulchinsky-Stern Holding Co. Ltd.
(f) "Dollars" or "$" shall mean the lawful currency of the
United States of America.
(g) "Dollar Equivalent" (a) as to any amount denominated in
Dollars, such amount in Dollars and (b) as to any amount denominated in any
Foreign Currency, the equivalent in Dollars of such Foreign Currency on any date
as determined by using the quoted Spot Rate to exchange Dollars for such Foreign
Currency in London prior to 4:00 p.m. (London time) on such date. "Foreign
Currency" shall mean any lawful currency (other than Dollars) that is freely
transferable or convertible into Dollars. "Spot Rate" shall mean, as of any date
of determination, the rate of exchange quoted by The Chase Manhattan Bank in
London, England at 11:00 a.m. (London, England time) on such date of
determination to prime banks in London, England for the spot purchase in the
foreign exchange market of such city of such amount of such Foreign Currency
with Dollars.
(h) "Environmental Laws" shall mean all applicable federal,
state, local or foreign laws, rules and regulations, orders, decrees, judgments,
permits, filings and licenses relating (i) to protection and clean-up of the
environment and activities or conditions related thereto, including those
relating to the generation, handling, disposal, transportation or release of
Hazardous Substances and (ii) the health or safety of employees in the workplace
environment, all as amended from time to time, and shall also include any common
law theory based on nuisance, trespass, negligence or other tortious conduct.
(i) "Exchange Agent" shall mean The Bank of New York or
another bank or trust company designated as the exchange agent by Lucent (which
designation shall be reasonably acceptable to the Company).
(j) "Final Determination" shall mean (i) a decision of the
United States Tax Court, or a decision, judgment, decree or other order by
another court of competent jurisdiction, which has become final and is either no
longer subject to appeal or for which a determination not to appeal has been
made; (ii) a closing agreement made under Section 7121 of the Code or any
comparable foreign, state, local or municipal Tax statute; (iii) any
disallowance of a claim for refund or credit in respect of an overpayment of Tax
unless a suit related thereto is filed on a timely basis; (iv) any final
disposition by reason of the expiration of the applicable statute of
limitations; or (v) the actual payment by the Company of Taxes.
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(k) "GAAP" shall mean United States generally accepted
accounting principles.
(l) "Hazardous Substances" shall mean any and all hazardous
and toxic substances, wastes or materials, any pollutants, contaminants, or
dangerous materials (including, but not limited to, polychlorinated biphenyls,
PCBs, friable asbestos, volatile and semi-volatile organic compounds, oil,
petroleum products and fractions, and any materials which include hazardous
constituents or become hazardous, toxic, or dangerous when their composition or
state is changed), or any other similar substances or materials which are
included under or regulated by any Environmental Laws.
(m) "Indebtedness" shall mean as at any date of determination,
the sum of the following items of the Company, without duplication: (i)
obligations created, issued or incurred for borrowed money, including all fees
and obligations thereunder (including, without limitation, any prepayment or
termination fees arising or which will arise out of the prepayment of such
Indebtedness prior to its maturity and termination), (ii) obligations to pay the
deferred purchase price or acquisition price of property or services, other than
trade or accounts payable arising, and accrued expenses incurred, in the
ordinary course of business consistent with past practice, (iii) the face amount
of all letters of credit issued for the account of the Company and all drafts
thereunder, (iv) capital lease obligations, if any, and (v) any obligation
guaranteeing any Indebtedness or other obligations of any other Person
(including any obligations under any keep well or support agreements).
(n) "Israeli Regulatory Approvals" shall mean the following
regulatory approvals or exemptions to be obtained from one or more Israeli
government offices or agencies:
(i) The approval of the Comptroller for Restrictive
Trade Practices pursuant to the provisions of the Restrictive
Trade Practices Law; and
(ii) The approval of the Investment Center for the
purchase of the Shares pursuant to the provisions of the
Encouragement of Capital Investment Law and the approvals
issued to the Company or CN Ltd. pursuant thereto.
(o) "Key Founders" shall mean Rafi Gidron and Orni Petruschka.
(p) "Liens" shall mean any mortgage, pledge, lien, security
interest, conditional or installment sale agreement, encumbrance, charge or
other claims of third parties of any kind.
(q) "Material Adverse Effect" shall mean (unless otherwise
specified) any condition or event that may:
(i) when used with respect to the Company or CN Ltd.:
(a) have a material adverse effect on the assets, business,
financial condition, operations of the Company and CN Ltd.
taken as a whole, (b) materially impair the ability of the
Company to perform its obligations under this Agreement, (c)
if Lucent utilizes the Form S-4 Alternative, prevent or delay
beyond November 30, 2000 the consummation of the transactions
contemplated under this Agreement, or (d) if Lucent utilizes
the Private Placement Alternative, prevent or delay beyond
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September 30, 2000 the consummation of the transactions
contemplated under this Agreement; and
(ii) when used with respect to Lucent: (a) materially
impair the ability of Lucent to perform its obligations under
this Agreement, (b) if Lucent utilizes the Form S-4
Alternative, prevent or delay beyond November 30, 2000 the
consummation of the transactions contemplated under this
Agreement or (c) if Lucent utilizes the Private Placement
Alternative, prevent or delay beyond September 30, 2000 the
consummation of the transactions contemplated under this
Agreement.
(r) "NIS" shall mean the lawful currency of Israel.
(s) "Permitted Liens" shall mean (a) Liens for taxes,
assessments, or similar charges, incurred in the ordinary course of business
that are not yet due and payable or are being contested in good faith; (b)
pledges or deposits made in the ordinary course of business; (c) Liens of
mechanics, materialmen, warehousemen or other like Liens securing obligations
incurred in the ordinary course of business that are not yet due and payable or
are being contested in good faith; and (d) similar Liens and encumbrances which
are incurred in the ordinary course of business and which do not in the
aggregate materially detract from the value of such assets or properties or
materially impair the use thereof in the operation of such business.
(t) "Preferred Warrant" shall mean the outstanding warrant to
purchase shares of Series D Preferred Stock held by U.S. Telesource, Inc.
(u) "Person" shall mean any individual, corporation,
partnership, limited partnership, limited liability company, trust, association
or entity or government agency or authority.
(v) "reasonable best efforts" shall mean prompt, substantial
and persistent efforts as a prudent Person desirous of achieving a result would
use in similar circumstances; provided that the Company, Lucent or Acquisition,
as applicable, shall be required to expend only such resources as are
commercially reasonable in the applicable circumstances.
(w) "Supplemental Escrow Agent" shall mean The Bank of New
York (or another institution selected by Lucent), as escrow agent under the
Supplemental Escrow Agreement.
(x) "Subsidiary" of a Person shall mean any corporation,
partnership, joint venture or other entity in which such Person (a) owns,
directly or indirectly, 50% or more of the outstanding voting securities or
equity interests or (b) is a general partner.
(y) "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") shall mean any United States, Israeli, state, local, municipal or
foreign net income, gross income, gross receipts, windfall profit, severance,
property, production, sales, use, license, excise, franchise, employment,
payroll, withholding, alternative or add-on minimum, ad valorem, value-added,
transfer, stamp, or environmental tax, or any other tax, custom, duty, tariff
levy, import,
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governmental fee or other like assessment or charge, together with any interest
or penalty, addition to tax or additional amount imposed by any governmental
authority.
(z) "Tax Return" shall mean any return, report or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
(aa) "Warrants" shall mean the Common Warrant and the
Preferred Warrant.
16. Notices. Any notice, request, demand, waiver, consent,
approval, or other communication which is required or permitted to be given to
any party hereunder shall be in writing and shall be deemed given only if
delivered to the party personally or sent to the party by facsimile transmission
(promptly followed by a hard-copy delivered in accordance with this Section 16)
or by registered or certified mail (return receipt requested), with postage and
registration or certification fees thereon prepaid, addressed to the party at
its address set forth below:
If to Acquisition or Lucent:
Lucent Technologies Inc.
c/o Optical Networks Group
101 Crawfords Corner Road
Holmdel, New Jersey 07733-3030
Attn: President
with copies to:
Lucent Technologies Inc.
c/o Optical Networks Group
101 Crawfords Corner Road
Holmdel, New Jersey 07733-3030
Attn: General Counsel
If to the Company:
Chromatis Networks Inc.
450 Spring Park Place
Suite 500
Herndon, Virginia 20170
Attn: General Counsel
with a copy to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
225 Wyman Street
Waltham, Massachusetts 02451
Attn: Jay K. Hachigian, Esq.
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and
Tulchinsky Stern & Co.
22 Kanfei Nesharim St.
Jerusalem 95464 Israel
Attn: Doron Stern
or to such other address or Person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have been
given as of the date so delivered, telegraphed or mailed.
17. Amendment. This Agreement may be amended, modified or supplemented
at any time prior to the Effective Time by mutual agreement of the respective
Boards of Directors of the parties hereto notwithstanding the approval hereof by
the stockholders of the Company or the stockholders of Acquisition, as
applicable, except as provided in Section 251(d) of the DGCL. Any amendment,
modification or revision of this Agreement and any waiver of compliance or
consent with respect hereto shall be effective only if in a written instrument
executed by the parties hereto.
18. Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of New York as applied to
contracts made and fully performed in such state, except insofar as the DGCL
shall be mandatorily applicable to the Merger and the rights of the stockholders
of the Company in connection therewith.
19. No Benefit to Others. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto, and their respective successors and assigns, and they shall not
be construed as conferring, and are not intended to confer, any rights on any
other Person.
20. Severability. If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other terms and provisions of the Agreement shall
remain in full force and effect. Upon such determination, the parties hereto
shall negotiate in good faith to modify this Agreement so as to give effect to
the original intent of the parties to the fullest extent permitted by applicable
law.
21. Section Headings. All section headings are for convenience only and
shall in no way modify or restrict any of the terms or provisions hereof.
22. Schedules and Exhibits. All Schedules and Exhibits referred to
herein are intended to be and hereby are specifically made a part of this
Agreement.
23. Extensions. At any time prior to the Effective Time, any party may
by corporate action, extend the time for compliance by or waive performance of
any representation, warranty, condition or obligation of any other party.
53
59
24. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and the Company,
Acquisition and Lucent may become a party hereto by executing a counterpart
hereof. This Agreement and any counterpart so executed shall be deemed to be one
and the same instrument.
[Remainder of page intentionally left blank]
54
60
IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound hereby, have duly executed this Agreement as of the date first
above written.
LUCENT TECHNOLOGIES INC.
By: /s/ Harry L. Bosco
Name: Harry L. Bosco
Title: President -- Optical Network Group
GOLDFISH ACQUISITION INC.
By: /s/ Harry L. Bosco
Name: Harry L. Bosco
Title: President
CHROMATIS NETWORKS INC.
By: /s/ Robert L. Barron
Name: Robert L. Barron
Title: CEO
61
Glossary of Defined Terms
<TABLE>
<CAPTION>
Defined Term Location of Definition
------------ ----------------------
<S> <C>
Acquisition.................................................. Preamble
Acquisition Agreement........................................ Section 5.4(b)
Acquisition Common Stock .................................... Recitals
Acquisition Proposal......................................... Section 5.4
Adjusted Option.............................................. Section 5.6
Affiliate.................................................... Section 15
Agreement.................................................... Preamble
Arbitration Service.......................................... Section 8.6
Authorizations............................................... Section 3.13(b)
Balance Sheet................................................ Section 3.5(a)
Benefits Date................................................ Section 5.8(a)
Benefit Plan................................................. Section 15
Best Knowledge............................................... Section 15
Business..................................................... Recitals
Certificate of Merger........................................ Section 1.1(b)
Certificates................................................. Section 1.9(b)
Closing...................................................... Section 1.1(b)
Closing Date................................................. Section 1.1(b)
CN Ltd....................................................... Recitals
CN Ltd. Shares............................................... Section 3.21(a)
Code......................................................... Section 15
Common Shares................................................ Section 3.2(a)
Common Warrant............................................... Section 15
Common Warrant Exchange Ratio................................ Section 5.6(f)
Common Warrant Shares........................................ Section 3.2(a)
Commonly Controlled Entity................................... Section 3.16(b)
Company...................................................... Preamble
Company Capital Stock........................................ Recitals
Company Common Stock......................................... Recitals
Company Preferred Stock...................................... Recitals
Company Stockholder.......................................... Section 8.1
Company Stockholders' Representative ........................ Section 8.8
Company Stockholders' Representative Notice.................. Section 8.5
Company Stock Option......................................... Section 5.6(a)
Company Stock Plan........................................... Section 5.6(a)
Confidentiality Agreement.................................... Section 12
Continuation Period.......................................... Section 5.8(a)
Damages...................................................... Section 8.2
DGCL......................................................... Recitals
Dissenting Shares............................................ Section 1.7
Dollars...................................................... Section 15
</TABLE>
I
62
<TABLE>
<S> <C>
Dollar Equivalent............................................ Section 15
Effective Time............................................... Section 1.1(b)
Environmental Laws........................................... Section 15
ERISA........................................................ Section 3.16(b)
Escrow Agent................................................. Section 8.1
Escrow Agreement............................................. Section 6.1
Escrow Fund.................................................. Section 8.1
Exchange Act................................................. Section 4.3(c)
Exchange Agent............................................... Section 15
Exchange Fund................................................ Section 1.9
Exchange Ratio............................................... Section 1.5(c)
Executive Employees.......................................... Section 3.17(a)
Final Determination.......................................... Section 15
Financial Statements......................................... Section 3.5(a)
Form S-4 Alternative......................................... Section 5.5(b)
GAAP......................................................... Section 15
Grants....................................................... Section 3.26
Hazardous Substances......................................... Section 15
HSR Act...................................................... Section 3.3(c)
Immaterial Authorizations.................................... Section 3.13(b)
Indebtedness................................................. Section 15
Indemnified Party............................................ Section 5.9(a)
Indemnified Person........................................... Section 8.2
Intellectual Property Rights................................. Section 3.14(a)
IRS.......................................................... Section 3.15(c)
Israeli Regulatory Approvals................................. Section 15
Key Founders................................................. Section 15
Laws......................................................... Section 3.13(a)
Liens........................................................ Section 15
Lucent....................................................... Preamble
Lucent Common Stock.......................................... Section 4.2
Lucent Authorized Preferred Stock............................ Section 4.2
Lucent Filed SEC Documents................................... Section 4.7
Lucent Plan.................................................. Section 5.8(b)
Lucent SEC Documents......................................... Section 4.5
Material Adverse Effect...................................... Section 15
Merger....................................................... Recitals
NIS.......................................................... Section 15
NYSE......................................................... Section 1.8
Outstanding Common Shares.................................... Section 3.2(a)
Outstanding Preferred Shares................................. Section 3.2(a)
Patents...................................................... Section 3.14(a)
Permitted Liens.............................................. Section 15
Person....................................................... Section 15
Preferred Shares............................................. Section 3.2(a)
Preferred Warrant............................................ Section 15
</TABLE>
II
63
<TABLE>
<S> <C>
Preferred Warrant Shares..................................... Section 3.2(a)
Private Placement Alternative................................ Section 5.5(a)
Reasonable Best Efforts...................................... Section 15
Registration Statement....................................... Section 5.5(a)
Requisite Stockholder Approval............................... Section 3.3(e)
Reserved Common Shares....................................... Section 3.2(a)
Restricted Stock Agreement................................... Section 3.16(c)
Restraints................................................... Section 6.1(c)
SEC.......................................................... Section 4.5
Securities Act............................................... Section 4.3(c)
Series A Preferred Stock..................................... Recitals
Series A-1 Preferred Stock................................... Recitals
Series B Preferred Stock..................................... Recitals
Series C Preferred Stock..................................... Recitals
Series C-1 Preferred Stock................................... Recitals
Series D Preferred Stock..................................... Recitals
Shares....................................................... Section 3.2(a)
Subsidiary................................................... Section 15
Substitute Restricted Stock.................................. Section 5.6(e)
Superior Proposal............................................ Section 5.4(a)
Supplemental Escrow Agreement................................ Section 6.1(e)
Supplemental Escrow Agent.................................... Section 15
Supplemental Financial Information........................... Section 5.3(c)
Surviving Corporation........................................ Section 1.1(a)
Tax.......................................................... Section 15
Tax Return................................................... Section 15
Termination Date............................................. Section 5.5(a)
Threshold.................................................... Section 8.3(a)
Unaudited Balance Sheet...................................... Section 3.5
Warrant...................................................... Section 15
Warrant Shares............................................... Section 3.2(f)
</TABLE>
EXHIBITS
Exhibit A Form of Certificate of Merger
Exhibit B Form of Affiliate Letter
Exhibit C Form of Escrow Agreement
Exhibit D Form of Supplemental Escrow Agreement
Exhibit E Form of Non-Competition and Non-Disclosure Agreement
III
64
SCHEDULES: 3.1
3.2(a)
3.2(b)
3.2(c)
3.3(b)
3.6(a)
3.6(b)
3.7(a)
3.7(b)
3.7(c)
3.9
3.10
3.11
3.12
3.13
3.14(a)
3.14(b)
3.14(c)
3.14(e)
3.15
3.16(b)(i)
3.16(b)(ii)
3.16(b)(iv)
3.16(b)(v)
3.16(b)(vi)
3.17
3.18
3.20
3.21
3.22
3.23
3.24
3.25
3.26
3.28
6.2(f)
9.1
IV
1
EXHIBIT 2.2
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LUCENT TECHNOLOGIES INC.,
KOSU ACQUISITION INC.,
HERRMANN TECHNOLOGY, INC.,
HERRMANN HOLDINGS, LTD.
ANNEM INVESTMENTS, LTD.
AND
HERRMANN TECHNOLOGY TRUST
Dated as of June 16, 2000
2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. The Merger.................................................................................................... 2
1.1 General................................................................................................. 2
1.2 Articles of Incorporation............................................................................... 2
1.3 By-Laws................................................................................................. 2
1.4 Directors and Officers.................................................................................. 2
1.5 Conversion of Securities................................................................................ 3
1.6 Adjustment of the Exchange Ratio........................................................................ 3
1.7 No Fractional Shares.................................................................................... 3
1.8 Exchange Procedures; Stock Transfer Books............................................................... 4
1.9 No Further Ownership Rights in Company Common Stock..................................................... 5
1.10 Further Assurances..................................................................................... 5
2. Approval by Shareholders...................................................................................... 5
2.1 Approval by Shareholders................................................................................ 5
3. Representations and Warranties of the Company................................................................. 5
3.1 Organization............................................................................................ 6
3.2 Capitalization; Options and Other Rights................................................................ 6
3.3 Authority; Shareholder Vote............................................................................. 7
3.4 Charter Documents....................................................................................... 8
3.5 Financial Statements.................................................................................... 8
3.6 Absence of Undisclosed Liabilities; Indebtedness........................................................ 9
3.7 Operations and Obligations.............................................................................. 9
3.8 Properties.............................................................................................. 11
3.9 Contracts............................................................................................... 11
3.10 Absence of Default..................................................................................... 13
3.11 Litigation............................................................................................. 13
3.12 Compliance with Law.................................................................................... 13
3.13 Intellectual Property; Year 2000....................................................................... 14
3.14 Tax Matters............................................................................................ 15
3.15 Employee Benefit Plans................................................................................. 16
3.16 Executive Employees.................................................................................... 17
3.17 Employees.............................................................................................. 17
3.18 Environmental Laws..................................................................................... 18
3.19 Bank Accounts, Letters of Credit and Powers of Attorney................................................ 18
3.20 Subsidiaries........................................................................................... 18
3.21 Insurance.............................................................................................. 18
3.22 Leases................................................................................................. 19
3.23 Assets................................................................................................. 19
3.24 Accounts Receivable; Inventory......................................................................... 19
3.25 Export Control Laws.................................................................................... 20
</TABLE>
i
3
<TABLE>
<CAPTION>
<S> <C>
3.26 Customers and Suppliers................................................................................ 20
3.27 Minute Books........................................................................................... 20
3.28 Financial Forecasts.................................................................................... 20
3.29 Complete Copies of Materials........................................................................... 21
3.30 Disclosure............................................................................................. 21
3.31 Reorganization......................................................................................... 21
3.32 Information in Lucent Registration Statement........................................................... 21
3.33 Investment Matters..................................................................................... 21
3.34 Private Placement...................................................................................... 22
3.35 Hart-Scott-Rodino Compliance........................................................................... 23
4. Representations and Warranties of Acquisition and Lucent...................................................... 23
4.1 Organization............................................................................................ 23
4.2 Capital Structure....................................................................................... 23
4.3 Authority............................................................................................... 24
4.4 Litigation.............................................................................................. 25
4.5 SEC Filings; Lucent Financial Statements................................................................ 25
4.6 Information Supplied.................................................................................... 26
4.7 Operations and Obligations.............................................................................. 26
4.8 Interim Operations of Acquisition....................................................................... 26
4.9 Reorganization.......................................................................................... 26
5. Conduct Pending Closing....................................................................................... 27
5.1 Exemption from Registration; Other Actions.............................................................. 27
5.2 Company Stock Options................................................................................... 27
5.3 Company Stock Plan...................................................................................... 28
5.4 Stock Exchange Listing.................................................................................. 29
5.5 Notification of Certain Matters......................................................................... 29
5.6 Tax Returns; Cooperation................................................................................ 29
5.7 Reorganization.......................................................................................... 29
5.8 Actions by the Parties.................................................................................. 29
5.9 Employee Benefit Plans.................................................................................. 30
5.10 Indemnification........................................................................................ 30
5.11 Actions by the Shareholders............................................................................ 31
5.12 Securities Matters..................................................................................... 31
6. Conditions Precedent.......................................................................................... 31
6.1 Conditions Precedent to Each Party's Obligation to Effect the Merger.................................... 31
6.2 Conditions Precedent to Obligations of Acquisition and Lucent........................................... 32
6.3 Conditions Precedent to the Company's Obligations....................................................... 33
6.4 Frustration of Closing Conditions....................................................................... 34
7. Survival of Representation and Warranties..................................................................... 34
7.1 Representations and Warranties.......................................................................... 34
</TABLE>
ii
4
<TABLE>
<CAPTION>
<S> <C>
8. Indemnification............................................................................................... 34
8.1 Escrow Shares........................................................................................... 34
8.2 General Indemnification................................................................................. 34
8.3 Claims Upon Escrow Fund................................................................................. 35
8.4 Objections to Claims.................................................................................... 36
8.5 Third-Party Claims...................................................................................... 36
9. Brokers' and Finders' Fees.................................................................................... 37
9.1 Company................................................................................................. 37
9.2 Acquisition and Lucent.................................................................................. 37
10. Expenses..................................................................................................... 37
11. Press Releases............................................................................................... 37
12. Contents of Agreement; Parties in Interest; etc.............................................................. 37
13. Assignment and Binding Effect................................................................................ 38
14. Definitions.................................................................................................. 38
15. Notices...................................................................................................... 40
16. Amendment.................................................................................................... 42
17. Governing Law................................................................................................ 42
18. No Benefit to Others......................................................................................... 42
19. Severability................................................................................................. 42
20. Section Headings............................................................................................. 42
21. Schedules and Exhibits....................................................................................... 42
22. Extensions................................................................................................... 42
23. Counterparts................................................................................................. 42
</TABLE>
iii
5
AGREEMENT AND
PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of June 16,
2000, by and among LUCENT TECHNOLOGIES INC., a Delaware corporation ("Lucent"),
KOSU ACQUISITION INC., a Texas corporation ("Acquisition"), HERRMANN TECHNOLOGY,
INC., a Texas corporation (the "Company"), HERRMANN HOLDINGS, LTD., a Texas
limited partnership ("Holdings"), ANNEM INVESTMENTS, LTD., a Texas limited
partnership ("Annem"), and HERRMANN TECHNOLOGY TRUST, a complex trust
established under the laws of the State of Texas (the "Trust").
BACKGROUND
A. The Company is a Texas corporation with its registered office
located at 10410 Miller Road, Dallas Texas, 75238, and has authorized 10,000,000
shares of common stock, par value $0.01 per share (the "Company Common Stock").
The Company is engaged principally in the design, development, production,
marketing and distribution of thin film optical filters for the dense wavelength
division multiplexing market (the "Business").
B. Lucent is a Delaware corporation with its registered office located
at 1013 Centre Road, Wilmington, Delaware.
C. Acquisition is a wholly-owned subsidiary of Lucent and was formed to
merge with and into the Company so that, as a result of the merger, the Company
will survive and become a wholly-owned subsidiary of Lucent. Acquisition is a
Texas corporation with its registered office located at 201 Main Street, Suite
2500, Forth Worth, Texas, 76102, and has authorized an aggregate of 1,000 shares
of common stock, no par value per share ("Acquisition Common Stock").
D. The Board of Directors of each of Acquisition and the Company has
determined that the merger of Acquisition with and into the Company (the
"Merger") in accordance with the provisions of the Texas Business Corporation
Act, as amended (the "TBCA"), and subject to the terms and conditions of this
Agreement, is in the best interests of Acquisition and the Company and their
respective shareholders.
E. The Boards of Directors of Acquisition and the Company have approved
this Agreement and the transactions contemplated hereby.
F. Holdings, Annem and the Trust (each a "Shareholder" and
collectively, the "Shareholders") own directly or beneficially 100% of the
issued and outstanding shares of capital stock of the Company.
G. The parties intend that, for federal income tax purposes, the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Code and that this Agreement shall constitute a plan of reorganization.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable
6
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto intending to be legally bound do hereby agree as follows:
1. The Merger
1.1 General.
(a) Subject to the terms and conditions of this Agreement and in
accordance with the TBCA, at the Effective Time, (i) Acquisition shall be merged
with and into the Company, (ii) the separate corporate existence of Acquisition
shall cease and (iii) the Company shall be the surviving corporation (the
"Surviving Corporation") and shall continue its corporate existence under the
laws of the State of Texas.
(b) Subject to the terms and conditions of this Agreement, the Company
and Acquisition shall duly execute and file at the time of the Closing (as
defined below) Articles of Merger, substantially in the form of Exhibit A
attached hereto (the "Articles of Merger"), with the Secretary of State of the
State of Texas together with all fees due and payable in connection therewith,
in each case, in accordance with the provisions of Article 5.04 of the TBCA. The
Merger shall have become effective upon the issuance of a Certificate of Merger
by the Secretary of State of the State of Texas in accordance with the
provisions of Article 5.04 of the TBCA (the "Effective Time"). The closing of
the Merger (the "Closing") shall take place at the offices of Sidley & Austin,
875 Third Avenue, New York, New York, at 4:01 P.M. on the date hereof, or on
such other date, time and place as the parties may mutually agree (the "Closing
Date").
(c) At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the TBCA. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and
Acquisition shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company and
Acquisition shall become the debts, liabilities, obligations, restrictions,
disabilities and duties of the Surviving Corporation.
1.2 Articles of Incorporation. The Articles of Incorporation of
Acquisition, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of the Surviving Corporation until thereafter amended
as provided therein and by law except that Article I of such Articles of
Incorporation shall be amended to read as follows: "The name of the Corporation
is: "Herrmann Technology, Inc."
1.3 By-Laws. The By-laws of Acquisition, as in effect immediately prior
to the Effective Time, shall be the By-laws of the Surviving Corporation until
thereafter amended as provided therein and by law.
1.4 Directors and Officers. From and after the Effective Time, (a) the
directors of Acquisition at the Effective Time shall be the initial directors of
the Surviving Corporation, each to hold office in accordance with the Articles
of Incorporation and By-laws of the Surviving Corporation, and (b) the officers
of Acquisition at the Effective Time shall be the initial officers of the
Surviving Corporation, in each case, until their respective successors are duly
elected or appointed and qualified.
2
7
1.5 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Acquisition, the Company or the
holders of any of the following securities:
(a) Each issued and outstanding share of common stock of Acquisition
shall be converted into one validly issued, fully paid and nonassessable share
of Common Stock, no par value per share, of the Surviving Corporation;
(b) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Acquisition or Lucent
shall be canceled without any conversion thereof and no payment or distribution
shall be made with respect thereto; and
(c) Subject to the provisions of Sections 1.6 and 1.7, each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares canceled in accordance with Section 1.5(b)) shall be
converted into 6.7702 (such number as adjusted in accordance with Section 1.6
(the "Exchange Ratio")) validly issued, fully paid and nonassessable shares of
Lucent Common Stock including the corresponding percentage right (the "Right")
to purchase shares of junior preferred stock, par value $1.00 per share,
pursuant to the Rights Agreement dated as of April 4, 1996, as amended, between
Lucent and The Bank of New York (successor to First Chicago Trust Company of New
York), as Rights Agent. All references in this Agreement to Lucent Common Stock
to be received in accordance with the Merger shall be deemed, from and after the
Effective Time, to include the Rights. As of the Effective Time, each share of
Company Common Stock shall no longer be outstanding and shall automatically be
canceled and retired, and each holder of a certificate representing any shares
of Company Common Stock shall cease to have any rights with respect thereto
other than (i) the right to receive shares of Lucent Common Stock to be issued
in consideration therefor upon the surrender of such certificate, and (ii) any
cash, without interest, to be paid in lieu of any fractional share of Lucent
Common Stock in accordance with Section 1.7.
1.6 Adjustment of the Exchange Ratio. In the event that, prior to the
Effective Time, any stock split, combination, reclassification or stock dividend
with respect to the Lucent Common Stock, any change or conversion of Lucent
Common Stock into other securities or any other dividend or distribution with
respect to the Lucent Common Stock (other than regular quarterly dividends)
should occur or, if a record date with respect to any of the foregoing should
occur, appropriate and proportionate adjustments shall be made to the Exchange
Ratio, and thereafter all references to the Exchange Ratio shall be deemed to be
to such Exchange Ratio as so adjusted.
1.7 No Fractional Shares. No certificates or scrip representing
fractional shares of Lucent Common Stock shall be issued upon the surrender for
exchange of Certificates and such fractional share shall not entitle the record
or beneficial owner thereof to vote or to any other rights as a stockholder of
Lucent. In lieu of receiving any such fractional share, the shareholder shall
receive cash (without interest) in an amount rounded to the nearest whole cent,
determined by multiplying (i) the per share closing price on the New York Stock
Exchange, Inc. (the "NYSE") of Lucent Common Stock (as reported on the NYSE
Composite Transactions Tape as such Tape is reported in the Wall Street Journal
or another recognized business
3
8
publication) on the date immediately preceding the date on which the Effective
Time shall occur (or, if the Lucent Common Stock did not trade on the NYSE on
such prior date, the last day of trading in Lucent Common Stock on the NYSE
prior to the Effective Time) by (ii) the fractional share to which such holder
would otherwise be entitled. Lucent shall make available to the Exchange Agent
the cash necessary for this purpose.
1.8 Exchange Procedures; Stock Transfer Books. (a) On or promptly after
the Effective Time, Lucent shall deliver, or cause to be delivered, to each
Shareholder in exchange for certificates representing the shares of Company
Common Stock held by such Shareholder and surrendered to Lucent or the Surviving
Corporation at the Closing (the "Certificates") (i) a certificate representing
the number of whole shares of Lucent Common Stock into which such shares of the
Company Common Stock will be converted at the Effective Time pursuant to Section
1.5(c), and (ii) cash in lieu of any fractional share of Lucent Common Stock in
accordance with Section 1.7. As soon as practicable after the Effective Time and
subject to and in accordance with the provisions of Section 8, Lucent shall
cause to be distributed to the Escrow Agent pursuant to the Escrow Agreement
certificates representing 10% of the shares of Lucent Common Stock to be issued
in exchange for the Company Common Stock, which shares shall be registered in
the name of the Escrow Agent as nominee for the Shareholders. All shares in the
Escrow Fund shall be beneficially owned by the Shareholders, shall be held in
escrow and shall be available to compensate Indemnified Persons as provided in
Section 8. To the extent not used for such purposes, such shares shall be
released as provided in the Escrow Agreement.
(b) Lucent shall be entitled to deduct and withhold from the
consideration otherwise payable to the Shareholders pursuant to this Agreement
such amounts as Lucent is required to deduct and withhold with respect to the
making of such payment under the Code, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Lucent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the Shareholders in respect of which such deduction and withholding
was made by Lucent. All amounts in respect of taxes received or withheld by
Lucent shall be disposed of by Lucent in accordance with the Code or such state,
local or foreign tax law, as applicable.
(c) If any Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the Person claiming such Certificate
to be lost, stolen or destroyed and subject to such other conditions as the
Board of Directors of the Surviving Corporation may impose, Lucent shall issue
in exchange for such lost, stolen or destroyed Certificate the shares of Lucent
Common Stock as determined under Section 1.5(c), as applicable, and pay any
cash, dividends or other distributions as determined in accordance with Section
1.7 in respect of such Certificate; provided that Lucent may, in its reasonable
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificate to deliver a bond in such
sum as it may reasonably require as indemnity against any claim that may be made
against Lucent or the Surviving Corporation with respect to the Certificate
alleged to have been lost, stolen or destroyed.
(d) At the close of business on the day on which the Effective Time
occurs, the stock transfer books of the Company shall be closed and thereafter
there shall be no further registration of transfers of shares of Company Common
Stock in the records of the Company.
4
9
From and after the Effective Time, the Shareholders shall cease to have any
rights with respect to the shares of Company Common Stock except as otherwise
provided herein or by applicable law.
1.9 No Further Ownership Rights in Company Common Stock. All
certificates representing shares of Lucent Common Stock delivered upon the
surrender for exchange of any Certificate in accordance with the terms hereof
(including any cash paid pursuant to Section 1.7 or Section 1.8) shall be deemed
to have been delivered (and paid) in full satisfaction of all rights pertaining
to the Company Common Stock previously represented by such Certificate.
1.10 Further Assurances. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either the
Company or Acquisition or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either the Company or Acquisition, all such deeds, bills of sale,
assignments and assurances and do, in the name and on behalf of the Company or
Acquisition, all such other acts and things necessary, desirable or proper to
vest, perfect or confirm its right, title or interest in, to or under any of the
rights, privileges, powers, franchises, properties or assets of the Company or
Acquisition, as applicable, and otherwise to carry out the purposes of this
Agreement.
2. Approval by Shareholders
2.1 Approval by Shareholders. Each of Acquisition and the Company shall
(a) call a meeting of its respective shareholders to be held as promptly as
practicable after the date hereof or (b) solicit written consents of its
respective shareholders in lieu thereof for purposes of voting upon this
Agreement. Each of the Company and Acquisition will, through its board of
directors, recommend to its shareholders approval of this Agreement. The Company
shall provide Lucent with a copy of all materials to be distributed to its
shareholders describing the transactions contemplated hereby not later than
three business days prior to distribution. The Company, Acquisition and Lucent
each agree to execute and deliver such further documents and instruments and to
do such other acts and things as may be required to complete all requisite
corporate action in connection with the transactions contemplated by this
Agreement. All materials distributed to the shareholders of the Company with
respect to this Agreement, including any description of the transactions
contemplated hereunder, the recommendation of the Board of Directors of the
Company that such shareholders approve the Merger, the vote by such shareholders
to approve this Agreement and the Merger and any description of appraisal rights
available to such shareholders shall be in form and substance reasonably
acceptable to Lucent and the Company, and shall be in accordance with applicable
law.
3. Representations and Warranties of the Company. The Shareholders,
jointly and severally, represent and warrant to Lucent and Acquisition with
respect to the matters set forth in Sections 3.1(b) and 3.1(c), the last
sentence of Section 3.2(a) and Sections 3.32, 3.33 and 3.34 as such relate to
the Shareholders, and each of the Company and the Shareholders
5
10
jointly and severally represent and warrant to Acquisition and Lucent with
respect to all other matters contained in this Section 3 as follows:
3.1 Organization. (a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority and all
necessary governmental approval to carry on its business as it has been and is
now being conducted. The Company is duly qualified or licensed as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except where the
failure to be so qualified or licensed and in good standing could not reasonably
be expected to have a Material Adverse Effect on the Company.
(b) Each of Holdings and Annem is a limited partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
formation. The general partner of each of Holdings and Annem has the sole voting
power to bind Holdings and Annem, as applicable.
(c) The Trust is duly and validly organized and existing under the laws
of the State of Texas as a complex trust under the Herrmann Technology Trust
Agreement dated April 16, 1999 (true and correct copies of which documents have
been separately delivered by the Shareholders to Lucent and are still in full
force and effect); Linda B. Herrmann is the authorized trustee of the Trust; and
the children of William L. Hart and Mary B. Hart and other issue are the owners
of the beneficial interest under the Trust with sole and unconditional power to
revoke and amend the Trust. The trustee of the Trust has the sole voting power
to bind the Trust.
3.2 Capitalization; Options and Other Rights. (a) The total authorized
shares of capital stock of the Company consists of 10,000,000 shares of Company
Common Stock, of which 1,000,000 shares are issued and outstanding (the
"Outstanding Common Shares"). All the Outstanding Common Shares have been duly
and validly authorized and issued and are fully paid and nonassessable. None of
the shares of Company Common Stock (the "Shares") has been issued in violation
of the preemptive rights of any shareholder of the Company. The Outstanding
Common Shares have been issued in compliance in all material respects with all
applicable laws, statutes, ordinances, rules, regulations, orders, writs,
injunctions, judgments or decrees entered, enacted, promulgated, enforced or
issued by any court or other governmental or regulatory authority, domestic or
foreign (collectively, "Laws"). The Shareholders own, directly or beneficially,
all the Shares and each Shareholder owns, directly or beneficially, such Shares
as are indicated opposite such Shareholder's name on Schedule 3.2(a).
(b) Except as set forth in Schedules 3.2(c), there are no existing
agreements, subscriptions, options, warrants, calls, commitments, trusts (voting
or otherwise), or rights of any kind whatsoever granting to any Person any
interest in or the right to purchase or otherwise acquire from the Company or
granting to the Company any interest in or the right to purchase or otherwise
acquire from any Person, at any time, or upon the occurrence of any stated
event, any securities of the Company, whether or not presently issued or
outstanding, nor are there any outstanding securities of the Company or any
other entity which are convertible into or exchangeable for other securities of
the Company, nor are there any agreements, subscriptions,
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options, warrants, calls, commitments or rights of any kind granting to any
Person any interest in or the right to purchase or otherwise acquire from the
Company or any other Person any securities so convertible or exchangeable, nor
are there any proxies, agreements or understandings with respect to the voting
of the Shares or the direction of the business operations or conduct of the
Company, except as contemplated by this Agreement.
(c) Schedule 3.2(c) lists all outstanding Company Stock Options,
showing for each such option: (i) the name of the optionee, (ii) the number of
shares issuable, (iii) the number of vested shares, (iv) the date of expiration
and (v) the exercise price. Except as set forth on Schedule 3.2(c), (i) each
Company Stock Option has been granted under the Company Stock Plan and (ii) the
per share exercise price of each Company Stock Option granted under the Company
Stock Plan is not less than the fair market value of a share of Company Common
Stock on the date of grant of the applicable Company Stock Option, as determined
in good faith by the Board of Directors of the Company. Each Company Stock
Option that has been granted under a stock plan other than the Company Stock
Plan has been granted on substantially similar terms as the Company Stock
Options granted under the Company Stock Plan.
3.3 Authority; Shareholder Vote. (a) Each of the Shareholders and the
Company has full power and authority to execute, deliver and perform this
Agreement, the Escrow Agreement and the transactions contemplated hereunder. The
execution, delivery and performance of this Agreement and the Escrow Agreement
by each of the Shareholders and the Company has been duly authorized and
approved by all necessary corporate or other action and, except for (i) the
approval of this Agreement by a vote of holders of at least two-thirds of the
Outstanding Common Shares and (ii) the filing and recordation of appropriate
merger documents as required by the TBCA, no other corporate or other
proceedings on the part of the Company or any Shareholder are necessary to
authorize this Agreement and the transactions contemplated hereby. This
Agreement has been duly authorized, executed and delivered by each of the
Shareholders and the Company and is the legal, valid and binding obligation of
each of the Shareholders and the Company enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(b) The execution, delivery and performance by each of the Shareholders
and the Company of this Agreement and the Escrow Agreement and the consummation
of the Merger do not, and will not (i) violate or conflict with any provision of
the Articles of Incorporation or By-laws of the Company, the respective limited
partnership agreements of Holdings or Annem, or the Trust Agreement of the
Trust, as applicable, (ii) violate any Law applicable to the Shareholders or the
Company, except for violations which, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect on the Company, or
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any note, bond, indenture,
lien, mortgage, lease, permit, guaranty or other agreement, instrument or
obligation to which the Shareholders or the Company is a party or by which any
of their properties may be bound, except (A) as set forth on Schedule 3.3(b) and
(B) for violations, breaches or defaults which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Shareholders or the Company.
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(c) The execution and delivery of this Agreement and the Escrow
Agreement by the Shareholders and the Company do not, and the performance by the
Shareholders and the Company of this Agreement and the Escrow Agreement will
not, require any consent, approval, authorization or permission of, or filing
with or notification to any governmental or regulatory authority, domestic or
foreign, or any other Person except (i) in the case of this Agreement, the
filing and recordation of appropriate merger documents as required by the TBCA
and (ii) any such consent, approval, authorization, permission, notice or filing
which if not obtained or made could not reasonably be expected to have a
Material Adverse Effect on the Company.
(d) The Board of Directors of the Company (i) has approved this
Agreement and the transactions contemplated hereby, (ii) has determined that the
terms of the Merger are in the best interests of the shareholders of the
Company, and (iii) has resolved to recommend the approval of the Merger and the
adoption of this Agreement and the consummation of the transactions contemplated
hereby to the shareholders of the Company.
(e) Pursuant to the provisions of the TBCA, the Articles of
Incorporation of the Company, the By-laws of the Company and any other
applicable law, the only approval of holders of Company Common Stock required to
approve the Merger and to approve and adopt the Agreement and the transactions
contemplated hereby is the approval of at least two-thirds of the outstanding
shares of Company Common Stock.
3.4 Charter Documents. The Company has previously furnished to Lucent a
true, complete and correct copy of the Articles of Incorporation and the By-laws
of the Company. The Articles of Incorporation and By-laws of the Company are in
full force and effect. The Company is not in violation of any provision of its
Articles of Incorporation or By-laws.
3.5 Financial Statements. (a) The Company has previously furnished to
Lucent true and complete copies of the following financial statements of the
Company (collectively, the "Financial Statements"):
(i) the unaudited balance sheet as of December 31, 1999 (the "1999
Balance Sheet") and the unaudited balance sheet as of December 31, 1998;
(ii) the unaudited statement of operations, shareholders' equity and
cash flows for the fiscal year ended December 31, 1999 and December 31
1998;
(iii) the unaudited balance sheet as of May 31, 2000 (the "Current
Balance Sheet"); and
(iv) the unaudited statement of operations, shareholders' equity and
cash flows for the 5-month period ended May 31, 2000 (the "Current
Statement of Operations").
(b) Except as disclosed on Schedule 3.5(b), the Financial Statements
were prepared in accordance with GAAP. The Financial Statements were prepared on
the basis of the books and records of the Company and present fairly, in all
material respects, the financial position of the Company as of the dates thereof
and the results of its operations, changes in shareholders' equity and cash
flows for each of the periods then ended in conformity with GAAP
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(except (i) for the omission of footnotes, (ii) in the case of the Current
Balance Sheet and the Current Statement of Operations, for normal and recurring
year-end adjustments and (iii) as set forth on Schedule 3.5(b)).
3.6 Absence of Undisclosed Liabilities; Indebtedness. Except as set
forth in the Financial Statements, the Company does not have any liability or
obligation of any nature (whether absolute, accrued or contingent or otherwise)
other than (i) liabilities or obligations not required under GAAP on a basis
consistent with that of preceding accounting periods to be reported on such
Financial Statements and (ii) liabilities or obligations incurred after the date
of the Current Balance Sheet incurred in the ordinary course of business and
consistent with past practice.
(a) Except as disclosed on Schedule 3.6(b), the Company has no
Indebtedness which in aggregate principal amount is greater than $100,000.
3.7 Operations and Obligations. Except as reflected in the Financial
Statements, and except as a result of the transactions contemplated by this
Agreement, since December 31, 1999,
(i) there has been no material adverse change in the assets, business,
condition (financial or otherwise), or operations of the Company and there
has been no event or condition that has had or could reasonably be expected
to have a Material Adverse Effect on the Company other than as a result of
(x) general economic conditions, (y) business and economic conditions
affecting the dense wavelength division multiplexing industry or (z) the
announcement of the transactions contemplated hereby; and
(ii) there has been no impairment, damage, destruction, loss or claim,
whether or not covered by insurance, or condemnation or other taking which
could reasonably be expected to have a Material Adverse Effect on the
Company.
(b) Except (i) as set forth in Schedule 3.7(b) and (ii) for actions
required to be taken hereunder or approved by Lucent, since December 31, 1999,
the Company has conducted its business only in the ordinary course and
consistent with past practice. Without limiting the generality of the foregoing,
since December 31, 1999, except as set forth in such Schedule, the Company has
not:
(i) issued, delivered or agreed (conditionally or unconditionally) to
issue or deliver, or granted any option, warrant or other right to
purchase, any of its capital stock or other equity interest or any security
convertible into its capital stock or other equity interest;
(ii) other than in the ordinary course of business consistent with past
practice, issued, delivered or agreed (conditionally or unconditionally) to
issue or deliver any bonds, notes or other debt securities, or borrowed or
agreed to borrow any funds or entered into any lease the obligations of
which, in accordance with generally accepted accounting principles, would
be capitalized;
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(iii) paid any obligation or liability (absolute or contingent) other
than current liabilities reflected or reserved against on the 1999 Balance
Sheet and current liabilities incurred thereafter in the ordinary course of
business consistent with past practice;
(iv) declared or made, or agreed to declare or make, any payment of
dividends or distributions to its shareholders or purchased or redeemed, or
agreed to purchase or redeem, any Company Common Stock;
(v) except in the ordinary course of business consistent with past
practice, made or permitted any material amendment or termination of any
agreement to which the Company is a party and is or should be set forth on
Schedule 3.9;
(vi) undertaken or committed to undertake capital expenditures
exceeding $100,000 for any single project or related series of projects;
(vii) sold, leased (as lessor), transferred or otherwise disposed of,
mortgaged or pledged, or imposed or suffered to be imposed any Lien on, any
of the assets reflected on the 1999 Balance Sheet or any assets thereafter
acquired by the Company, except for inventory and personal property sold or
otherwise disposed of for fair value in the ordinary course of its business
consistent with past practice and except for Permitted Liens;
(viii) canceled any debts owed to or claims held by the Company
(including the settlement of any claims or litigation) other than in the
ordinary course of its business consistent with past practice;
(ix) accelerated or delayed collection of accounts receivable in
advance of or beyond their regular due dates or the dates when the same
would have been collected except in the ordinary course of its business
consistent with past practice;
(x) delayed or accelerated payment of any account payable or other
liability beyond or in advance of its due date or the date when such
liability would have been paid except in the ordinary course of its
business consistent with past practice;
(xi) entered into or become committed to enter into any other material
transaction except in the ordinary course of business;
(xii) allowed the levels of supplies or other materials included in the
inventory of the Company to vary materially from the levels customarily
maintained in accordance with past practice;
(xiii) except for increases in the ordinary course of business
consistent with past practice, instituted any increase in any compensation
payable to any employee of the Company, amended any Plan or modified any
other benefits made available to any such employees;
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(xiv) made any change in the accounting principles or made any material
change in accounting practices used by the Company, in each case, from
those applied in the preparation of the Financial Statements;
(xv) reclassified, combined, split, subdivided or redeemed, purchased
or otherwise acquired, directly or indirectly, any of its capital stock;
(xvi) entered into or agreed to enter into or terminate (prior to the
expiration date thereof) any employment agreement;
(xvii) increased the compensation or benefits payable or to become
payable to its officers or employees, except for increases in accordance
with past practices in salaries, bonuses or wages of employees of the
Company who are not officers of the Company, or granted any severance or
termination pay to, or entered into any severance agreement with any
director, officer or other employee of the Company, or established,
adopted, entered into or amended any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any such director, officer or employee;
(xviii) made any material Tax election or settled or compromised any
material federal, state, local or foreign income Tax liability; or
(xix) except in connection with the sale of the Company's products in
the ordinary course of business and consistent with past practice, sold,
assigned, transferred, licensed, sublicensed, pledged or otherwise
encumbered any of the Intellectual Property Rights.
(c) There are no accrued and unpaid dividends or distributions with
respect to any capital stock of the Company.
3.8 Properties. (a) The Company has good and valid title to all its
properties and assets as reflected on the Current Balance Sheet or acquired
after the date thereof except for (i) properties and assets sold or otherwise
disposed of in the ordinary course of business since the date of such Current
Balance Sheet, (ii) leasehold interests, in which event the Company has a valid
leasehold interest and (iii) properties and assets which individually or in the
aggregate are not material either in value or to the operations of the business
of the Company.
(b) The Company does not own any real property.
3.9 Contracts. Schedule 3.9 lists any of the following not otherwise
listed on any other Schedule:
(a) each written contract or commitment which creates an obligation on
the part of the Company in excess of $100,000;
(b) each written debt instrument, including, without limitation, any
loan agreement, line of credit, promissory note, security agreement or other
evidence of indebtedness,
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where the Company is a lender, borrower or guarantor, in a principal amount in
excess of $50,000;
(c) each written contract or commitment restricting the Company from
engaging in any industry or in any line of business in any location;
(d) each written contract to which the Company is a party containing a
change of control provision;
(e) each written contract or commitment in excess of $10,000 to which
the Company is a party for any charitable contribution;
(f) each written joint venture or partnership agreement to which the
Company is a party;
(g) each written distributorship, sales agency, sales representative,
reseller or marketing, value added reseller and original equipment manufacturing
agreement, in each case, to which the Company is a party;
(h) any written agreement (including any technology transfer and source
code license agreement) to which the Company is a party containing rights of
third parties, or granting rights for the Company, to license or sublicense
software, technology, patents, know-how, copyrights, trademarks or any other
intellectual property of any kind (excluding licenses to operate software that
is generally available for purchase "off the shelf" by the public);
(i) each written agreement in excess of $50,000 to which the Company is
a party with respect to any assignment, discounting or reduction of any
receivables of the Company;
(j) each agreement, option or commitment or right with, or held by, any
third party to acquire any assets or properties, or any interest therein, of the
Company, having a value in excess of $50,000, except for contracts for the sale
of inventory, machinery or equipment in the ordinary course of business;
(k) each written employment or consulting contract entered into by the
Company which is currently in effect; and
(l) each supply agreement that the Company could not readily replace
without a material impact on the Company.
Except as set forth on Schedule 3.9, (i) there are no oral contracts or
commitments of the types described in this Section 3.9 which create an
obligation on the part of the Company which are individually in excess of
$50,000 or in the aggregate in excess of $100,000, (ii) there are no contracts
or commitments between the Company and any Affiliate, (iii) there are no
contracts, commitments or arrangements with any employee which require the
payment of any compensation upon the occurrence of any specified contingency,
(iv) there are no contracts or arrangements, except this Agreement, which
require notice to, the consent of, or any payment of any compensation (whether
as a penalty, liquidated damages or otherwise) to any party with
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respect to the Merger or any of the transactions contemplated hereby or in the
event of the termination of such contract or arrangement on or following the
Effective Time, and (v) there are no contracts which would create rights to any
Person against Lucent or any of its Affiliates (other than rights against the
Company as in effect on the Closing Date).
3.10 Absence of Default. Except as set forth in Schedule 3.10, (a) each
of the agreements listed on Schedules 3.9, 3.13, 3.16 and 3.22 that creates
obligations of any person in excess of $50,000 or in the aggregate in excess of
$150,000 are, and after giving effect to the Merger will be, valid, binding and
in full force and effect; (b) the Company has fulfilled and performed in all
material respects its obligations required to be fulfilled or performed as of
the date hereof under each such agreement (in each case, to which the Company is
a party); (c) the Company is not and is not alleged in writing to be, and to the
best knowledge of the Company, each other party to any such agreement is not, in
default under, nor is there or is there alleged in writing to be any basis for
termination of, any such agreement; (d) no event has occurred and no condition
or state of facts exists which, with the passage of time or the giving of notice
or both, would constitute such a default or breach by the Company or, to the
best knowledge of the Company, by any such other party; and (e) the Company is
not currently renegotiating any such agreement or paying liquidated damages in
lieu of performance thereunder. The Company has previously delivered complete
and correct copies of all such agreements (including all amendments) to Lucent.
3.11 Litigation. Except as set forth in Schedule 3.11, there are no
actions, suits, arbitrations, legal or administrative proceedings or
investigations pending or, to the best knowledge of the Company, threatened
against the Company which if determined in a manner adverse to the Company could
reasonably be expected to have a Material Adverse Effect on the Company. Neither
the Company nor the assets, properties or business of the Company is subject to
any judgment, order, writ, injunction or decree of any court, arbitration
tribunal or other governmental or regulatory authority, domestic or foreign. The
Company is neither a plaintiff in any such proceeding nor contemplating
commencing legal action against any other Person.
3.12 Compliance with Law.
(a) The Company has complied in all material respects with, and is not
in violation of, in any material respect, any Law to which it or its business is
subject.
(b) The Company has obtained all licenses, permits, certificates or
other governmental authorizations (collectively "Authorizations") necessary for
the ownership or use of its assets and properties or the conduct of its business
other than Authorizations (i) which are ministerial in nature and which the
Company has no reason to believe would not be issued in due course and (ii)
which, the failure of the Company to possess, would not subject the Company to
penalties other than fines not to exceed $25,000 in the aggregate and would not
materially adversely affect the operations or the business of the Company
("Immaterial Authorizations").
(c) The Company has not received written notice of violation of, or, to
the best knowledge of the Company, know of any material violation of, any Laws
to which it or its business is subject or any Authorization necessary for the
ownership or use of its assets and properties or the conduct of its business
(other than Immaterial Authorizations).
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3.13 Intellectual Property; Year 2000. (a) The Company owns, or is
validly licensed or otherwise has the right to use, all patents, and patent
rights ("Patents") and all trademarks, trade secrets, trademark rights, trade
names, trade name rights, service marks, service mark rights, copyrights and
other proprietary intellectual property rights and computer programs (the
"Intellectual Property Rights"), in each case, which are material to the conduct
of the business of the Company. Schedule 3.13(a) contains a list of (i) Patents
and Patent applications, (ii) trademark registrations and applications and (iii)
copyright registrations and applications owned by the Company.
(b) The Company has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
Rights of any other Person. To the best knowledge of the Company, the Company
has not interfered with, infringed upon, misappropriated or otherwise come into
conflict with any Patent of any other Person. The Company has not received any
charge, complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or violation (including any claim that the
Company must license or refrain from using any Patents or Intellectual Property
Rights of any other Person) which has not been settled or otherwise fully
resolved. To the best knowledge of the Company, no other Person has interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Patents or Intellectual Property Rights of the Company.
(c) Assuming that Lucent continues to operate the Business of the
Company as presently conducted, then, to the best knowledge of the Company,
Lucent's use of the Patents or Intellectual Property Rights which is material to
the conduct of the business by the Company will not interfere with, infringe
upon, misappropriate or otherwise come into conflict with the Patents or
Intellectual Property Rights of any other Person.
(d) Each employee, agent, consultant, officer, director or contractor
who has contributed to or participated in the creation or development of any
copyrightable, patentable or trade secret material on behalf of the Company or
any predecessor in interest thereto either: (i) is a party to a "work-for-hire"
agreement under which the Company is deemed to be the original owner/author of
all property rights therein; or (ii) has executed an assignment or an agreement
to assign in favor of the Company or such predecessor in interest, as
applicable, all right, title and interest in such material, a copy of which
assignment or agreement to assign has been made available to Lucent.
(e) The Company has taken all necessary steps directed at ensuring that
its products (including prior and current products and technology and products
and technology currently under development) will, when used in accordance with
associated documentation on a specified platform or platforms, be capable upon
installation of (i) operating in accordance with their specifications on dates
in both the Twentieth and Twenty-First centuries and (ii) accurately processing,
providing and receiving date data from, into and between the Twentieth and
Twenty-First centuries, including the years 1999 and 2000, and making leap-year
calculations; provided, that all non-Company products (e.g., hardware, software
or firmware) used in or in combination with the Company's products properly
exchange data with the Company's products in the same manner on dates in both
the Twentieth and Twenty-First centuries. Further, to the best knowledge of the
Company, the Company has taken all necessary steps to assure that the year 2000
date change will not adversely affect its operations or the systems and
facilities that support
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the operations of the Company, except as could not reasonably be expected to
have a Material Adverse Effect on the Company. Finally, in conjunction with the
Year 2000 date transition, the Company has not experienced any material
date-related failures of its systems and has no knowledge of any date related
issues experienced by its customers with respect to the Company's products.
(f) Except as set forth on Schedule 3.13(f), the Company has not sold,
assigned, transferred, licensed or sublicensed, or entered into any contract
(oral or written) or other arrangement to sell, assign, transfer, sublicense or
encumber its Patents or Intellectual Property Rights other than in the ordinary
course of business, and the Company has not entered into any contract (oral or
written) or other arrangement pursuant to which the Company has agreed or is
obligated to license, transfer, place in escrow or encumber the source code for
any of its products (prior or current) or restrict the use of any of its Patents
or Intellectual Property Rights.
(g) No shareholder of the Company, nor, to the best knowledge of the
Company, any past or present employee, agent, officer, director, consultant or
contractor of the Company, has any interest or right, or claims any interest or
right (other than as a shareholder of the Company) in any Patent or Intellectual
Property Right that is material to the business and operations as currently
conducted by the Company.
3.14 Tax Matters. (a) Except as set forth on Schedule 3.14(a), (i) the
Company has filed all Tax Returns required to be filed; (ii) all such Tax
Returns are complete and accurate in all material respects and all Taxes shown
to be due on such Tax Returns have been or will be timely paid; (iii) all Taxes
(whether or not shown on any Tax Return) owed by the Company have been timely
paid or the Company has established adequate reserves therefor; (iv) the Company
has not waived or been requested to waive any statute of limitations in respect
of Taxes; (v) the Tax Returns referred to in clause (i) have been examined by
the Internal Revenue Service (the "IRS") or the appropriate state, local or
foreign taxing authority or the period for assessment of the Taxes in respect of
which such Tax Returns were required to be filed has expired; (vi) there is no
action, suit, investigation, audit, claim or assessment pending or, to the best
knowledge of the Company, proposed or threatened with respect to Taxes of the
Company; (vii) all deficiencies asserted or assessments made as a result of any
examination of the Tax Returns referred to in clause (i) have been paid in full;
(viii) Tax indemnity arrangements, if any, will terminate prior to Closing and
the Surviving Corporation will not have any liability thereunder on or after
Closing; (ix) there are no liens for Taxes upon the assets of the Company except
liens relating to current Taxes not yet due; (x) all Taxes which the Company is
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid or accrued, reserved against and entered on
the books of the Company in accordance with GAAP; (xi) except for the Merger,
since December 31, 1999, the Company has not taken any action that would, under
applicable law, materially adversely impact Lucent's or the Company's ability to
utilize any net operating carry forwards of the Company; and (xii) the Company
is not and has not been a member of any group of corporations filing a
consolidated tax return for United States federal income tax purposes.
(b) No consent to the application of Section 341(f)(2) of the Code has
been filed with respect to any property or assets held or acquired or to be
acquired by the Company.
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The Company has not made any election that could result in any adverse tax
consequences to the Company.
(c) The Company (i) has not agreed to and is not required to make any
adjustment pursuant to Section 481(a) of the Code; (ii) to the best knowledge of
the Company, the IRS has not proposed any such adjustment or change in
accounting method with respect to the Company; and (iii) does not have any
application pending with the IRS or any other tax authority requesting
permission for any change in accounting method.
(d) The Company does not own any interest in any (i) domestic
international sales corporation, (ii) foreign sales corporation, (iii)
controlled foreign corporation, or (iv) passive foreign investment company.
(e) The Company is not a party (other than as an investor) to any
industrial development bond.
(f) The Company has never been and is not a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(g) The Company has not constituted either a "distributing corporation"
or a "controlled corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (i) in the two years prior to the date
of this Agreement or (ii) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.
3.15 Employee Benefit Plans. (a) Schedule 3.15(a) contains a list of
all "employee pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) (the "Pension
Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA)
(sometimes referred to as "Welfare Plans") and all other Benefit Plans (together
with the Pension Plans and Welfare Plans, the "Plans") maintained, or
contributed to, by the Company or any Person that, together with the Company, is
treated as a single employer under Section 414(b), (c), (m) or (o) of the Code
(the Company and each such other Person, a "Commonly Controlled Entity") for the
benefit of any current or any former employees, officers or directors of the
Company. The Company has made available to Lucent true, complete and correct
copies of (i) each Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (ii) the most recent annual report on Form 5500 filed
with the IRS with respect to each Plan (if any such report was required), (iii)
the most recent summary plan description for each Plan for which such summary
plan description is required, (iv) each trust agreement and group annuity
contract relating to any Plan and (v) all correspondence with the IRS or the
United States Department of Labor relating to any outstanding controversy or
audit. Except as could not reasonably be expected to have a Material Adverse
Effect on the Company, (x) each Plan has been administered in accordance with
its terms, and (y) the Company and all Plans are in compliance with applicable
provisions of ERISA and the Code.
(b) Except as set forth in Schedule 3.15(b), all Pension Plans that are
intended to be qualified under Section 401(a) of the Code have been the subject
of a determination
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opinion, notification or advisory letter from the IRS to the effect that such
Pension Plans is so qualified and the trust thereunder is exempt from Federal
income taxes under Section 501(a) of the Code, and no such determination letter
has been revoked nor has any event occurred since the date of such Plan's most
recent determination letter that would adversely affect its qualification or
materially increase its costs.
(c) Neither the Company nor any Commonly Controlled Entity has
maintained, contributed to or been obligated to contribute to any Plan that is
subject to Title IV of ERISA.
(d) The Company does not have any liability or obligation under any
Welfare Plan to provide life insurance or medical benefits after termination of
employment to any employee or dependent other than as required by Part 6 of
Title I of ERISA.
(e) Except as provided by this Agreement, no employee of the Company
will be entitled to any additional compensation or benefits or any acceleration
of the time of payment or vesting of any compensation or benefits under any Plan
as a result of the transactions contemplated by this Agreement.
(f) The deduction of any amount payable pursuant to the terms of the
Plans will not be subject to disallowance under Section 162 (m) of the Code.
(g) The Company has not issued any Company Common Stock under any
restricted stock purchase arrangement and the Company is not a party to any
restricted stock purchase arrangement.
3.16 Executive Employees. (a) Schedule 3.16(a) lists the names, titles
and current annual salary rates of and bonuses paid during the 1999 fiscal year
or payable to all present officers and employees of each of the Company whose
1999 annual base salary exceeded $75,000 ("Executive Employees").
(b) Except as set forth in Schedules 3.15(a) or 3.16(b), the Company
does not have any employment agreement with, or maintain any employee benefit
plan (within the meaning of Section 3(3) of ERISA) with respect to, any of its
Executive Employees. Except as set forth on Schedule 3.16(b), there are no
agreements with respect to Executive Employees which are subject to Section 280G
of the Code or which would obligate the Company to make any payment or provide
any benefit that could be subject to tax under Section 4999 of the Code.
3.17 Employees. (a) The Company has complied in all respects with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, other than instances of
non-compliance which, individually or in the aggregate, could not reasonably be
expected to result in penalties and fines in an amount not exceeding $75,000 in
the aggregate, and the Company is not liable for any arrears of wages or any
taxes or penalties for failure to comply with any such Laws; (b) the Company
believes that the Company's relations with its employees is satisfactory; (c)
there are no controversies pending or, to the best knowledge of the Company,
threatened between the Company and any of its employees, which controversies
have or could reasonably be expected to have a Material Adverse Effect on the
Company; (d) the Company is not a party to any collective bargaining
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agreement or other labor union contract applicable to persons employed by the
Company, nor, to the best knowledge of the Company, are there any activities or
proceedings of any labor union to organize any such employees; (e) there are no
unfair labor practice complaints pending against the Company before the National
Labor Relations Board or any current union representation questions involving
employees of the Company; (f) there is no strike, slowdown, work stoppage or
lockout existing, or, to the best knowledge of the Company, threatened, by or
with respect to any employees of the Company; (g) no charges are pending before
the Equal Employment Opportunity Commission or any state, local or foreign
agency responsible for the prevention of unlawful employment practices with
respect to the Company; (h) there are no claims pending against the Company
before any workers' compensation board; and (i) the Company has not received
notice that any Federal, state, local or foreign agency responsible for the
enforcement of labor or employment laws intends to conduct an investigation of
or relating to the Company and, to the best knowledge of the Company, no such
investigation is in progress.
3.18 Environmental Laws. The Company has not received any notice or
claim (and is not aware of any facts that would form a reasonable basis for any
claim), or entered into any negotiations or agreements with any other Person,
and, to the best knowledge of the Company, the Company is not the subject of any
investigation by any governmental or regulatory authority, domestic or foreign,
relating to any liability or remedial action under any Environmental Laws except
for such notice, claim, negotiation, agreement or investigation that will not
have a Material Adverse Effect on the Company. There are no pending or, to the
knowledge of the Company, threatened, actions, suits or proceedings against the
Company or any of its properties, assets or operations asserting any such
liability or seeking any remedial action in connection with any Environmental
Laws except for such actions, suits or proceedings that will not have a Material
Adverse Effect on the Company.
3.19 Bank Accounts, Letters of Credit and Powers of Attorney. Schedule
3.19 lists (a) all bank accounts, lock boxes and safe deposit boxes relating to
the business and operations of the Company (including the name of the Bank or
other institution where such account or box is located and the name of each
authorized signatory thereto), (b) all outstanding letters of credit issued by
financial institutions for the account of the Company (setting forth, in each
case, the financial institution issuing such letter of credit, the maximum
amount available under such letter of credit, the terms (including the
expiration date) of such letter of credit and the party or parties in whose
favor such letter of credit was issued), and (c) the name and address of each
Person who has a power of attorney to act on behalf of the Company. The Company
has heretofore delivered to Lucent true, correct and complete copies of each
letter of credit and each power of attorney described on Schedule 3.19.
3.20 Subsidiaries. The Company does not, directly or indirectly, have
any ownership or other interest in, or control of, any Person, nor is the
Company controlled by or under common control with any Person other than the
Shareholders.
3.21 Insurance. Schedule 3.21 sets forth a list and brief description
(including nature of coverage, limits, deductibles, premiums and the loss
experience) of all policies of insurance maintained, owned or held by the
Company, and, with respect to loss experience, a description of such loss
experience for the twenty-four month period up to and including the date hereof.
The Company shall use all commercially reasonable efforts to keep such insurance
or
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comparable insurance in full force and effect through the Closing Date. The
Company has complied with each such insurance policy to which it is a party and
has not failed to give any notice or present any claim thereunder in a due and
timely manner, except for non-compliance or failure that could not reasonably be
expected to have a Material Adverse Effect on the Company. Except as disclosed
in Schedule 3.21, to the best knowledge of the Company, the full policy limits
(subject to deductibles provided in such policies) are available and unimpaired
under each such policy and, to the best knowledge of the Company, no insurer
under any of such policies has a basis to void such policy on grounds of
non-disclosure on the part of the Company thereunder. Each such policy is in
full force and effect and will not in any way be affected by or terminate or
lapse by reason of the transactions contemplated by this Agreement.
3.22 Leases. Schedule 3.22 lists all outstanding leases, both capital
and operating, or licenses, pursuant to which the Company has (i) obtained the
right to use or occupy any real property or personal property where the value of
such personal property exceeds $50,000 in the case of any single lease or
$100,000 in the aggregate, or (ii) granted to any other Person the right to use
any property described on Schedule 3.23(a).
3.23 Assets. (a) Schedule 3.23(a) lists each material item of
machinery, equipment, furniture, vehicles or other personal property owned by
the Company having an original cost of $50,000 or more.
(b) Except as set forth in Schedule 3.23(b), the assets and properties
owned or leased by the Company constitute all the material assets and properties
used by the Company in the operation of its business (including all books,
records, computers and computer programs and data processing systems but
excluding Intellectual Property Rights and Patents) and are in good and
serviceable condition (subject, in each case, to normal wear and tear and
obsolescence and except for assets the book value of which does not exceed
$25,000 in the aggregate; provided that the foregoing wear, tear and
obsolescence shall not materially disrupt the Business of the Company as
presently being conducted) and are suitable for the uses for which intended.
3.24 Accounts Receivable; Inventory. (a) All accounts receivable of the
Company (i) have arisen from bona fide transactions by the Company in the
ordinary course of its business and represent bona fide claims against debtors
for sales and other charges and (ii) are not subject to discount except for
normal cash and immaterial trade discounts. To the best knowledge of the
Company, all accounts receivable reflected in the Current Balance Sheet are good
and collectible in the ordinary course of business at the aggregate recorded
amounts thereof, net of any applicable allowance for doubtful accounts reflected
in such balance sheet.
(b) The inventories (and any reserves with respect thereto that have
been established by the Company) of the Company as of May 31, 2000 are described
in Schedule 3.24. All such inventories (net of any such reserves) are properly
included in the Financial Statements in accordance with GAAP, and are of such
quality as to be useable and saleable in the ordinary course of business
(subject in the case of work-in-process inventory to completion in the ordinary
course of business) and (i) are properly included in the Financial Statements in
accordance with GAAP and (ii) are reflected in the books and records of the
Company at the lower of cost (determined under the first-in, first-out method)
or market value. The inventories of the Company are located at the locations set
forth in Schedule 3.24.
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3.25 Export Control Laws. The Company has conducted its export
transactions in accordance with applicable provisions of United States export
control laws and regulations, including but not limited to the Export
Administration Act and implementing Export Administration Regulations, except
for such violations which would not have a Material Adverse Effect on the
Company. Without limiting the foregoing:
(i) The Company has obtained all export licenses and other
approvals required for its exports of products, software and
technologies from the United States except where the failure to obtain
such export licenses and other approvals would not subject the Company
to penalties other than fines not to exceed $100,000 in the aggregate;
(ii) The Company is in compliance with the terms of all
applicable export licenses or other approvals;
(iii) There are no pending or, to the best knowledge of the
Company, threatened claims against the Company with respect to such
export licenses or other approvals;
(iv) There are no actions, conditions or circumstances
pertaining to the Company's export transactions that may give rise to
any future claims; and
(v) No consents or approvals for the transfer of export
licenses to Lucent are required, or such consents and approvals can be
obtained expeditiously without material cost.
3.26 Customers and Suppliers. None of the Company's customers which
individually accounted for more than 5% of the Company's gross revenues during
the five (5) months ended May 31, 2000 has terminated or indicated that it
intends to terminate any agreement with the Company. As of the date hereof, no
material supplier of the Company has indicated that it will stop, or decrease
the rate of, supplying materials, products or services to the Company.
3.27 Minute Books. The minute books of the Company made available to
Lucent contain a complete and accurate summary of all meetings of directors and
shareholders or actions by written resolutions since the time of incorporation
of the Company through the date of this Agreement, and reflect all transactions
referred to in such minutes and resolutions accurately, except for omissions
which are not material.
3.28 Financial Forecasts. The Company has made available to Lucent
certain financial forecasts with respect to the Company's business which
forecasts were prepared by the Company based upon the assumptions reflected
therein. The Company makes no representation or warranty regarding the accuracy
of such forecasts or as to whether such forecasts will be achieved or otherwise,
except that the Company represents and warrants that such forecasts were
prepared in good faith and are based on assumptions believed by the Company at
the time such forecasts were delivered to Lucent to be reasonable.
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3.29 Complete Copies of Materials. The Company has delivered or made
available true and complete copies of each document that has been requested by
Lucent or its counsel in connection with their legal and accounting review of
the Company.
3.30 Disclosure. None of the representations or warranties of the
Company contained herein, none of the information contained in the Schedules
referred to in this Section 3, and none of the other information or documents
furnished to Lucent or Acquisition by the Company or provided pursuant to the
terms of this Agreement, contains any untrue statement of a material fact or
omits to state a material fact herein or therein necessary in order to make the
statements contained herein or therein not misleading in any material respect.
3.31 Reorganization. The Company has not taken any action or failed to
take any action which action or failure would jeopardize the qualification of
the Merger as a reorganization within the meaning of Section 368(a) of the Code.
3.32 Information in Lucent Registration Statement. None of the
information to be supplied by the Company or any Shareholder specifically for
inclusion or incorporation by reference in the registration statement on Form
S-3 or such other form as may be appropriate to be filed with the SEC by Lucent
under the Securities Act of 1933 (together with the rules and regulations
thereunder, the "Securities Act"), for the purpose of registering the public
resale by the Shareholders of shares of Lucent Common Stock to be issued in the
Merger (together with any amendments or supplements thereto, whether prior to or
after the effective date thereof, the "Registration Statement") will, at the
time the Registration Statement is filed with the SEC or at the time the
Registration Statement becomes effective under the Securities Act, will contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
3.33 Investment Matters. (a) Each Shareholder agrees not to engage in
any hedging transactions with regard to the Consideration Shares unless in
compliance with the Securities Act.
(b) Each Shareholder acknowledges and agrees that the Consideration
Shares are being offered and sold to the Shareholders in reliance on specific
exemptions from the registration requirements of the United States federal and
state securities laws and that Lucent is relying upon the truth and accuracy of
the representations, warranties, agreements, acknowledgments and understandings
of the Shareholders set forth herein in order to determine the applicability of
such exemptions and the suitability of the Shareholders to acquire the
Consideration Shares.
(c) Each Shareholder has received and has had an opportunity to review
Lucent's Annual Report on Form 10-K for the fiscal years ended September 30,
1999 and September 30, 1998, Lucent's 1999 Annual Report to Shareowners for
fiscal 1999, Lucent's Proxy Statement for the 2000 annual meeting of
stockholders, Lucent's Quarterly Reports on Form 10-Q for the quarters ended
December 31, 1999 and March 31, 2000 and Lucent's Current Report on Form 8-K
dated May 5, 2000 and each Shareholder has had a reasonable opportunity to ask
questions of and receive answers from Lucent concerning Lucent, and to obtain
any
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additional information reasonably necessary to verify the accuracy of the
information furnished to the Shareholders concerning Lucent and all such
questions, if any, have been answered to the full satisfaction of the
Shareholders.
(d) Each Shareholder acknowledges that no representations or warranties
have been made with respect to the Consideration Shares to such Shareholder by
Lucent or any agent, employee or Affiliate of Lucent other than those contained
in this Agreement, and in entering into the transactions contemplated hereunder
such Shareholder is not relying upon any information, other than that referred
to in the foregoing paragraph, contained in this Agreement, and the results of
independent investigations by such Shareholder and its representatives; provided
that each Shareholder acknowledges and agrees that the only representations or
warranties that Lucent has made with respect to such information are as set
forth in this Agreement.
3.34 Private Placement. (a) Each Shareholder acknowledges that each
certificate representing the Consideration Shares delivered to or on behalf of
such Shareholder and the Escrow Agent shall include the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE (THE "SHARES") HAVE
NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR WITH ANY SECURITIES
REGULATORY AUTHORITY OF ANY STATE OF THE UNITED STATES OR
OTHER JURISDICTION. NEITHER THE SHARES NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION, EXCEPT PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, SUCH
REGISTRATION REQUIREMENTS. BY THE ACQUISITION HEREOF, THE
HOLDER AGREES THAT SUCH HOLDER WILL GIVE EACH PERSON TO WHOM
THE SHARES ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN THE CASE OF ANY TRANSFER OR OTHER
DISPOSITION MADE OTHERWISE THAN PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, THE HOLDER HEREOF SHALL
BE REQUIRED TO PROVIDE TO THE COMPANY, PRIOR TO SUCH TRANSFER,
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
TRANSFER IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION UNDER
THE ACT AND IN COMPLIANCE WITH ALL APPLICABLE STATE SECURITIES
LAWS.
(b) Each Shareholder understands that the Consideration Shares are
being issued to such Shareholder and the Escrow Agent in reliance on an
exemption from the
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registration requirements of the Securities Act for an offer and sale of
securities that does not involve a public offering and have not been registered
under the Securities Act or with any securities regulatory authority of any
state of the United States or other jurisdiction and, therefore, that such
Consideration Shares (and all securities issued in exchange therefor or in
substitution thereof) cannot be resold in the absence of such registration
except pursuant to an exemption from, or in a transaction not subject to, such
registration requirements. Each Shareholder agrees that he shall not transfer
any of the Consideration Shares except in a transaction registered under the
Securities Act or unless such Shareholder shall have delivered to Lucent an
opinion of United States counsel, which counsel and opinion shall be reasonably
satisfactory to Lucent, that such transfer is being effected in accordance with
an available exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
(c) Each Shareholder is either an Accredited Investor or, immediately
prior to receipt of any information regarding Lucent, had such knowledge and
experience (alone or with a Purchaser Representative) in financial and business
matters as to be able to evaluate the merits and risks of an investment in
Lucent.
(d) Each Shareholder will acquire the Consideration Shares for his own
account and not with a view to any distribution (within the meaning of the
Securities Act) thereof or with any present intention of offering or selling any
of the Consideration Shares in a transaction that would violate the Securities
Act or the securities Laws of any state of the United States or any other
applicable jurisdiction.
(e) No Shareholder is in the business of buying and selling securities.
(f) Each Shareholder acknowledges and agrees that any resale or other
transfer, or attempted resale or other transfer, which Lucent determines in good
faith was made other than in compliance with the restrictions stated herein
shall not be recognized by Lucent in respect of the Consideration Shares, and
that Lucent may deliver a corresponding stop-transfer order to Lucent's transfer
agent to that effect.
3.35 Hart-Scott-Rodino Compliance. The Company is its own "ultimate
parent entity" (as defined in 16 CFR Section 801.1(a)(3)). The "person" (as
defined in 16 CFR Section 801.1(a)(1)) in which the Company is included does not
have annual net sales or "total assets" (as each such term is defined in 16 CFR
Section 801.11)) of $10,000,000 or more.
4. Representations and Warranties of Acquisition and Lucent. Each of
Acquisition and Lucent represents and warrants to the Shareholders as follows:
4.1 Organization. Each of Lucent and Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority and all necessary governmental approvals to enter into and perform
this Agreement and the transactions contemplated hereby to be performed by it.
4.2 Capital Structure. The authorized capital stock of Lucent as of the
date of this Agreement consists of (i) 10,000,000,000 shares of common stock,
par value $.01 per share
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(the "Lucent Common Stock"), of which approximately 3,200,000,000 shares of
common stock were outstanding as of March 31, 2000, and (ii) 250,000,000 shares
of preferred stock, par value $1.00 per share ("Lucent Authorized Preferred
Stock"), of which 15,000,000 shares have been designated Series A Junior
Participating Preferred Stock (the "Lucent Junior Preferred Stock"), none of
which are outstanding. All the outstanding shares of Lucent Common Stock have
been duly and validly authorized and issued and are fully paid and
nonassessable. None of the outstanding shares of Lucent Common Stock has been
issued in violation of the preemptive rights of any shareholder of Lucent. The
shares of outstanding Lucent Common Stock were issued in compliance in all
material respects with all Laws. The shares of Lucent Common Stock to be issued
pursuant to the Merger and upon exercise of the Adjusted Options will be duly
and validly authorized and issued, will be fully paid and non-assessable and
will not be issued in violation of the preemptive rights of any shareholder of
Lucent or in violation of any Laws.
4.3 Authority. (a) Each of Lucent and Acquisition has full corporate
power and authority to execute, deliver and perform this Agreement and the
transactions contemplated hereunder. The Board of Directors of Acquisition has
declared the Merger advisable and approved this Agreement and resolved to
recommend the approval of the Merger and adoption of this Agreement and the
consummation of the transactions contemplated hereby to the sole shareholder of
Acquisition. The execution, delivery and performance of this Agreement by each
of Lucent and Acquisition has been duly authorized and approved (i) in the case
of Acquisition, by its Board of Directors and sole shareholder and (ii) in the
case of Lucent, by all necessary corporate action and, except for (A) the
adoption of this Agreement by the shareholder of Acquisition and (B) the filing
of appropriate merger documents as required by the TBCA no other corporate
proceedings other than actions previously taken on the part of either Lucent or
Acquisition are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by each of Lucent and Acquisition and is the legal, valid and binding
obligation of each of Lucent and Acquisition enforceable in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(b) The execution, delivery and performance by each of Lucent and
Acquisition of this Agreement and the consummation of the Merger do not, and
will not, (i) violate or conflict with any provision of the Certificate of
Incorporation or By-laws of Lucent or the Articles of Incorporation or By-laws
of Acquisition, (ii) violate any Law, except for violations which, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect on Lucent and Acquisition taken as a whole, or (iii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration) under, any note, bond, indenture, lien, mortgage, lease,
permit, guaranty or other agreement, instrument or obligation, oral or written,
to which Lucent or Acquisition is a party or by which any of the properties of
Lucent or Acquisition may be bound, except for violations, breaches or defaults
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on Lucent, its Subsidiaries and Acquisition taken
as a whole.
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(c) The execution and delivery of this Agreement by each of Lucent and
Acquisition does not, and the performance by each of Lucent and Acquisition of
this Agreement will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or regulatory authority,
domestic or foreign, or any other Person except (i) the filing and recordation
of appropriate merger documents as required by the TBCA, (ii) any such consent,
approval, authorization, permission, notice or filing which is required under
the Securities Act, the Securities Exchange Act of 1934 (together with the rules
and regulations promulgated thereunder, the "Exchange Act") and applicable state
securities laws, and (iii) any such consent, approval, authorization,
permission, notice or filing which if not obtained or made could not reasonably
be expected to have a Material Adverse Effect on Lucent, its Subsidiaries and
Acquisition taken as a whole.
4.4 Litigation. (a) Neither Lucent nor Acquisition is a party to any
suit, action, arbitration or legal, administrative, governmental or other
proceeding or investigation pending or, to its knowledge threatened, which
reasonably could adversely affect or restrict its ability to consummate the
transactions contemplated by this Agreement or to perform its obligations
hereunder.
(b) There is no judgment, order, writ, injunction or decree of any
court, arbitration tribunal or other governmental or regulatory authority,
domestic or foreign, to which Lucent or Acquisition is subject which might
adversely affect or restrict its ability to consummate the transactions
contemplated by this Agreement or to perform its obligations hereunder.
4.5 SEC Filings; Lucent Financial Statements. (a) Since October 1,
1999, Lucent has filed with the Securities and Exchange Commission (the "SEC")
all reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) required to be filed
under the Securities Act and the Exchange Act (the "Lucent SEC Documents"). As
of their respective dates, the Lucent SEC Documents have complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Lucent SEC Documents and, except to the extent
that information contained in any Lucent SEC Document has been revised or
superseded by a later filed Lucent SEC Document, none of the Lucent SEC
Documents when filed contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of Lucent included in
the Lucent SEC Documents comply as to form, as of their respective dates of
filing with the SEC, in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present in all material respects the consolidated
financial position of Lucent and its consolidated Subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
recurring year-end audit adjustments).
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(b) Except for liabilities (i) reflected in such financial statements
or in the notes thereto, (ii) incurred in the ordinary course of business
consistent with past practice since the date of the most recent audited
financial statements included in the Lucent SEC Documents, or (iii) incurred in
connection with this Agreement or the transactions contemplated hereby, neither
Lucent nor any of its Subsidiaries has any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature which, individually or
in the aggregate, could reasonably be expected to have a Material Adverse Effect
on Lucent and its Subsidiaries taken as a whole.
4.6 Information Supplied. None of the information to be supplied by
Lucent specifically for inclusion or incorporation by reference in the
Registration Statement, at the time the Registration Statement becomes effective
under the Securities Act, will contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading. The Registration Statement will
comply as to form in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by Lucent with respect to
statements made or incorporated by reference therein based on information
supplied by the Company or any Shareholder specifically for inclusion or
incorporation by reference in the Registration Statement.
4.7 Operations and Obligations. Except as described in the Lucent SEC
Documents, since the date of the most recent audited balance sheet of Lucent
contained in the Lucent SEC Documents, (i) except as a result of the
transactions contemplated by this Agreement or in connection with the
acquisition by Lucent or any of its Subsidiaries of all or substantially all the
capital stock or all or substantially all the assets of another Person, there
has not been any development that has had or could reasonably be expected to
have a Material Adverse Effect on Lucent and its Subsidiaries taken as a whole;
(ii) there has not been any material change by Lucent in its accounting methods,
principles or practices, except as required by changes in GAAP or any other
change provided such other change could not reasonably be expected to have a
Material Adverse Effect on Lucent and its Subsidiaries; or (iii) except as a
result of the transactions contemplated by this Agreement or in connection with
the acquisition by Lucent or any of its Subsidiaries of all or substantially all
the capital stock or all or substantially all the assets of another Person,
there has not been any material revaluation by Lucent of any of its assets
including, without limitation, writing down the value of capitalized software or
inventory or writing off notes or accounts receivable which could reasonably be
expected to have a Material Adverse Effect.
4.8 Interim Operations of Acquisition. Acquisition was formed solely
for the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby.
4.9 Reorganization. Neither Lucent nor any of its Subsidiaries has
taken any action or failed to take any action which action or failure would
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code.
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5. Conduct Pending Closing.
5.1 Exemption from Registration; Other Actions. (a) The shares of
Lucent Common Stock to be issued in connection with the Merger will be issued in
a transaction exempt from registration under the Securities Act by reason of
Section 4(2) thereof. Lucent shall use its reasonable best efforts to prepare,
file and cause to become effective, as promptly as practicable after Lucent
shall have received all relevant information to be provided by the Company or
the Shareholders in connection with such filing, the Registration Statement
covering the public resale of such shares of Lucent Common Stock to be issued in
connection with the Merger, and Lucent shall use its reasonable best efforts to
keep the Registration Statement effective until the first anniversary of the
Effective Time (such anniversary date being referred to herein as the
"Termination Date"). Any such registration shall be subject to the customary
terms and conditions used in connection with resale prospectuses; provided that
if Lucent determines that sales under the Registration Statement would require
disclosure of non-public information material to Lucent at a time when Lucent
desires not to disclose such information, Lucent may, upon written notice to the
Shareholders, suspend on one occasion and for a period not to exceed 30
consecutive days the right of the Shareholders to effect resales, pursuant to
such Registration Statement, of such shares of Lucent Common Stock issued in
connection with the Merger, and Lucent agrees to promptly notify the
Shareholders prior to the expiration of such period of the date on which they
may again effect resales under the Registration Statement.
(b) Each party hereto agrees, subject to applicable laws relating to
the exchange of information, promptly to furnish the other parties hereto with
copies of written communications (and memoranda setting forth the substance of
all oral communications) received by such party, or any of its Subsidiaries,
affiliates or associates (as such terms are defined in Rule 12b-2 under the
Exchange Act as in effect on the date hereof), from, or delivered by any of the
foregoing to, any governmental or regulatory authority, domestic or foreign,
relating to or in respect of the transactions contemplated under this Agreement.
5.2 Company Stock Options. (a) Prior to the Closing Date, the Board of
Directors of the Company (or, if appropriate, any committee administering the
Herrmann Technology, Inc. 1999 Incentive Stock Option Plan (the "Company Stock
Plan")) shall adopt such resolutions or take such other actions as may be
required to effect the following:
(i) adjust the terms of all outstanding options to purchase
shares of Company Common Stock (the "Company Stock Options"), whether
vested or unvested, as necessary to provide that, at the Effective
Time, each Company Stock Option outstanding immediately prior to the
Effective Time shall be amended and converted into an option to
acquire, on the same terms and conditions as were applicable under such
Company Stock Option, the number of shares of Lucent Common Stock
(rounded down to the nearest whole share) equal to (A) the number of
shares of Company Common Stock subject to such Company Stock Option
immediately prior to the Effective Time multiplied by (B) the Exchange
Ratio, at an exercise price per share of Lucent Common Stock (rounded
to the nearest 1/100th of a whole cent) equal to (x) the exercise price
per share of such Company Common Stock immediately prior to the
Effective Time divided by (y) the Exchange Ratio (each Company Stock
Option as so adjusted, an "Adjusted Option"); and
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(ii) make such other changes to the Company Stock Plan as the
Company and Lucent may agree are appropriate to give effect to the
Merger, including as provided in Section 5.3.
(b) As soon as practicable after the Effective Time, Lucent shall
deliver to the holders of Company Stock Options appropriate notices (the
"Company Stock Option Notices") setting forth (i) such holders' rights pursuant
to the Company Stock Plan and the agreements evidencing the grants of such
Company Stock Options and that such Company Stock Options and agreements shall
be assumed by Lucent and shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 5.2 after giving
effect to the Merger) and (ii) the procedures for the exercise of the Adjusted
Options. The term, exercisability, vesting schedule (including any acceleration
provisions therein as set forth in Schedule 3.2(c)), status as an "incentive
stock option" under Section 422 of the Code, if applicable, and all of the other
terms of the Company Stock Options shall otherwise remain unchanged.
(c) A holder of an Adjusted Option may exercise such Adjusted Option in
whole or in part by (i) following the exercise procedures to be delivered by
Lucent as set forth in the Company Stock Option Notice and (ii) concurrently
delivering to Lucent the consideration therefor and any applicable withholding
tax.
(d) Except as otherwise contemplated by this Section 5.2 and except to
the extent required under the terms of the Company Stock Options, all
restrictions or limitations on transfer and vesting with respect to Company
Stock Options awarded under the Company Stock Plan or any other plan, program or
arrangement of the Company, to the extent that such restrictions or limitations
shall not have already lapsed, shall remain in full force and effect with
respect to such options after giving effect to the Merger and the assumption by
Lucent as set forth above.
(e) The Company shall furnish all information concerning the Company
and the holders of Company Common Stock as may be reasonably requested in
connection with any of the foregoing. Within 30 days after the later to occur of
(x) the Effective Time, and (y) Lucent's receipt of the information necessary
therefor Lucent shall prepare and file with the SEC a registration statement on
Form S-8 (or another appropriate form) registering the number of shares subject
to the Adjusted Options. Such registration statement shall be kept effective
(and the current status of the prospectus required thereby shall be maintained
in accordance with the relevant requirements of the Securities Act and the
Exchange Act) at least for so long as any Adjusted Options remain outstanding.
5.3 Company Stock Plan. At the Effective Time, by virtue of the Merger,
the Company Stock Plan and the Company Stock Options granted thereunder shall be
assumed by Lucent, with the result that all obligations of the Company under the
Company Stock Plan, including with respect to awards outstanding at the
Effective Time under the Company Stock Plan, shall be obligations of Lucent
following the Effective Time; provided, that in the case of any Company Stock
Option to which Section 421 of the Code applies by reason of its qualification
under Section 422 or Section 423 of the Code, the option price, number of shares
purchasable pursuant to such Company Stock Option and the terms and conditions
of exercise of
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such Company Stock Option shall be determined in order to comply with Section
424 of the Code. Prior to the Effective Time, Lucent shall take all necessary
actions (including, if required to comply with Section 162(m) of the Code (and
the regulations thereunder) or applicable law or rule of the NYSE, obtaining the
approval of its shareholders at the next regularly scheduled annual meeting of
Lucent following the Effective Time) for the assumption of the Company Stock
Plans, including the reservation, issuance and listing of Lucent Common Stock in
a number at least equal to the number of shares of Lucent Common Stock that will
be subject to the Adjusted Options.
5.4 Stock Exchange Listing. Lucent shall use its reasonable best
efforts to list on the NYSE, upon official notice of issuance, the shares of
Lucent Common Stock to be issued in connection with the Merger and upon exercise
of Adjusted Options.
5.5 Notification of Certain Matters. The Company shall give prompt
notice to Lucent, and Lucent shall give prompt notice to the Company, of (a) the
occurrence, or non-occurrence, of any event which would be likely to cause (i)
any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (ii) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied; and (b) any
failure of the Company, Lucent or Acquisition, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided that the delivery of any notice pursuant to
this Section 5.5 shall not limit or otherwise affect the remedies available to
the party receiving such notice.
5.6 Tax Returns; Cooperation. The Company on the one hand and Lucent on
the other will cooperate with each other and provide such information as any
party may require in order to file any return to determine Tax liability or a
right to a Tax refund or to conduct a Tax audit or other Tax proceeding. Such
cooperation shall include, but not be limited to, making employees available on
a mutually convenient basis to explain any documents or information provided
hereunder or otherwise as required in the conduct of any audit or other
proceeding. The Company and Lucent will retain until the expiration of any
applicable statute of limitations (including any extensions thereof) all Tax
Returns, schedules and workpapers and all other material records or documents
relating to the Company for all Tax periods through the first Tax period ending
after the Closing Date. At the expiration of such statutory period (including
any extensions thereof), each party shall have the right to dispose of any such
Tax Returns and other documents or records on thirty (30) days written notice to
the other party. Any information, documents or records obtained under this
Section 5.6 shall be kept confidential, except as may be otherwise necessary in
connection with the filing of Tax Returns or claims for refund or in conducting
an audit or other proceeding.
5.7 Reorganization. Each of Lucent and the Company shall use its
reasonable best efforts to cause the Merger to be qualified as a reorganization
under Section 368(a) of the Code.
5.8 Actions by the Parties. Upon the terms and subject to the
conditions set forth in this Agreement, each of the parties hereto will use its
reasonable best efforts to take or cause to be taken all actions, and to do, or
cause to be done, all things necessary, proper or advisable under applicable Law
to consummate and make effective in the most expeditious
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manner practicable, the transactions contemplated by this Agreement including
(i) the obtaining of all necessary actions and non-actions, waivers and
consents, if any, from any governmental or regulatory authority, domestic and
foreign, and the making of all necessary registrations and filings and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by any governmental or
regulatory authority, domestic and foreign; (ii) the obtaining of all necessary
consents, approvals or waivers from any other Person; (iii) the defending of any
claim, investigation, action, suit or other legal proceeding, whether judicial
or administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby; and (iv) the execution of additional
instruments necessary to consummate the transactions contemplated by this
Agreement. Each party will promptly consult with the other and provide necessary
information (including copies thereof) with respect to all filings made by such
party with the any agency or authority in connection with this Agreement and the
transactions contemplated hereby.
5.9 Employee Benefit Plans. (a) As soon as practicable after the
Effective Time (the "Benefits Date"), Lucent shall provide, or cause to be
provided, employee benefit plans, programs and arrangements to employees of the
Company that are the same as those made generally available to similarly
situated employees of Lucent's Microelectronic Group who are hired by Lucent
after December 31, 1999. From the Effective Time to the Benefits Date (which the
parties acknowledge may occur on different dates with respect to different
plans, programs or arrangements of the Company), Lucent shall provide, or cause
to be provided, the employee benefit plans, programs and arrangements of the
Company provided to employees of the Company as of the date hereof.
(b) With respect to each benefit plan, program or arrangement
maintained by Lucent in which employees of the Company subsequently participate
(the "Lucent Plans"), for purposes of eligibility to participate, vesting and
vacation entitlement (but not for accrual of pension or post retirement health
benefits), service with the Company shall be treated as service with Lucent;
provided, that such service shall not be recognized to the extent that such
recognition would result in a duplication of benefits. Such service also shall
apply for purposes of satisfying any waiting periods, evidence of insurability
requirements, or the application of any pre-existing condition limitations. The
Company's employees shall be given credit for amounts paid under a corresponding
benefits plan during the same period for purposes of applying deductibles,
co-payments and out-of-pocket maximums as though such amounts had been paid in
accordance with the terms and conditions of the Lucent Plans.
5.10 Indemnification. (a) From and after the Effective Time, Lucent
shall, or shall cause the Surviving Corporation to, fulfill and honor in all
respects the obligations of the Company to indemnify each Person who is or was a
director or officer (an "Indemnified Party") of the Company pursuant to any
indemnification provision of the Articles of Incorporation or By-laws or
equivalent constituent documents of the Company as each is in effect on the date
hereof.
(b) For a period of six years after the Effective Time, Lucent shall
cause to be maintained in effect officers' and directors' liability insurance
with respect to each Indemnified Party of the Company covering acts or omissions
by such Person occurring prior to the Effective Time under customary terms and
conditions.
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5.11 Actions by the Shareholders. The Shareholders shall cause the
Company to fulfill its obligations under this Agreement.
5.12 Securities Matters. The Shareholders will not sell, assign,
transfer or otherwise dispose of any of the Consideration Shares other than in
accordance with applicable federal and state securities laws or an exemption
therefrom.
6. Conditions Precedent.
6.1 Conditions Precedent to Each Party's Obligation to Effect the
Merger. The respective obligations of each party hereto to effect the Merger
shall be subject to the fulfillment or satisfaction, prior to or on the Closing
Date, of the following conditions:
(a) Shareholder Approval. The Merger shall have been duly approved by
the requisite vote of the outstanding shares of Common Stock of the Company and
the common stock, no par value per share, of Acquisition entitled to vote
thereon in accordance with the TBCA and the Articles of Incorporation and
By-laws of each of the Company and Acquisition, respectively.
(b) Approvals. All authorizations, consents, orders, declarations or
approvals of, or filings with, or terminations or expirations of waiting periods
imposed by, any governmental or regulatory authority, domestic or foreign, which
the failure to obtain, make or occur would have the effect of making the Merger
or any of the transactions contemplated hereby illegal or could reasonably be
expected to have a Material Adverse Effect on Lucent or the Company (as
Surviving Corporation), assuming the Merger had taken place, shall have been
obtained, made or occurred.
(c) Other Approvals. All authorizations, consents, orders, declarations
or approvals of, or filings with, or terminations or expirations of waiting
periods imposed by, any governmental or regulatory authority, domestic or
foreign, which the failure to obtain, make or occur would have the effect of
making or any of the transactions contemplated hereby illegal or would have a
Material Adverse Effect on Lucent or the Company shall have been obtained, made
or occurred.
(d) No Litigation. No judgment, order, decree, statute, law, ordinance,
rule or regulation, entered, enacted, promulgated, enforced or issued by any
court or other Governmental Entity of competent jurisdiction or other legal
restraint or prohibition (collectively, "Restraints") shall be in effect against
any of the parties hereto with respect to the transactions contemplated hereby,
and there shall not be pending any suit, action or proceeding by any
Governmental Entity (i) preventing the consummation of the Merger or (ii) which
otherwise is reasonably likely to have a Material Adverse Effect on the Company
or Lucent, as applicable; provided, that each of the parties shall have used its
reasonable best efforts to prevent the entry of any such Restraints and to
appeal as promptly as possible any such Restraints that may be entered.
(e) Escrow Agreement. Each of Lucent, the Company, the Escrow Agent and
the Shareholders shall have entered into the Escrow Agreement substantially in
the form of Exhibit B hereto (the "Escrow Agreement").
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(f) Representation Letters. Each of the Company and Lucent shall have
executed and delivered a letter of representation relating to certain tax
matters substantially in the form of Exhibits C and D hereto.
(g) Stock Exchange Listing. The shares of Lucent Common Stock issued in
accordance with the Merger and upon exercise of the Adjusted Options shall have
been authorized for listing on the NYSE, subject to official notice of issuance.
6.2 Conditions Precedent to Obligations of Acquisition and Lucent. All
obligations of Acquisition and Lucent under this Agreement are subject to the
fulfillment or satisfaction, prior to or on the Closing Date, of each of the
following conditions precedent:
(a) Performance of Obligations; Representations and Warranties. The
Company and the Shareholders shall have performed and complied in all material
respects with all agreements and conditions contained in this Agreement that are
required to be performed or complied with by it prior to or at the Closing. Each
of the Company's and the Shareholders' representations and warranties contained
in Section 3 of this Agreement (i) to the extent it is qualified by Material
Adverse Effect or materiality and the Company's representations and warranties
contained in Section 3.13 shall be true and correct and (ii) to the extent it is
not so qualified by Material Adverse Effect or materiality or contained in
Section 3.13, shall be true and correct in all material respects, in each case,
on and as of the Closing with the same effect as though such representations and
warranties were made on and as of the Closing, except (A) for changes permitted
by this Agreement and (B) to the extent that any representations and warranties
expressly relate to an earlier date, in which case such representations and
warranties shall be as of such earlier date.
(b) Opinion of Counsel. Lucent and Acquisition shall have received the
favorable written opinion dated the Closing Date of Haynes and Boone, LLP,
counsel to the Company, in form satisfactory to Lucent and Acquisition.
(c) Resignations. The Company shall have delivered to Lucent and
Acquisition the written resignation of each director and officer of the Company
as shall be requested in writing by Lucent.
(d) No Material Adverse Change. There shall have been no material
adverse change in the assets, business, financial condition, or operations of
the Company and no event or events shall have occurred that could reasonably be
expected to have a Material Adverse Effect on the Company other than as a result
of (i) general economic conditions, (ii) business and economic conditions
affecting the dense wavelength division multiplexing industry, or (iii) the
announcement of the transactions contemplated hereby .
(e) Consents. The Company shall have received all necessary consents,
in form and substance reasonably satisfactory to Lucent and Acquisition, from
the other parties to each contract, lease or agreement to which the Company is a
party, except (i) where the failure to receive such consent could not reasonably
be expected, individually or in the aggregate, to have a Material Adverse Effect
on the Company and (ii) such consents as set forth on Schedule 6.2(e).
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(f) Non-Competition Agreements. Each of the individuals listed on
Schedule 6.2(f) shall have entered into Non-Competition Agreements with the
Surviving Corporation, each substantially in the form of Exhibit E hereto, and
such agreements shall be in full force and effect.
(g) Substitute Form W-9. Acquisition and Lucent shall have received
Substitute Forms W-9 under the Code in form and substance acceptable to
Acquisition and Lucent executed by each of the Shareholders.
(h) Real Property Certificate. Lucent shall have received a certificate
from the Company certifying that the Company has never been and is not a United
States real property holding corporation within the meaning of Section 897(c)(2)
of the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code pursuant to Treas. Reg. Sec. 1.897-2(h) and Treas. Reg. Sec.
1.1445-2(c)(3)(i) at the Closing.
(i) Stock Option Agreement. Each holder of Company Stock Options shall
have entered into an amendment to the agreement regarding their Company Stock
Options, each substantially in the form of Exhibit F hereto.
(j) Shareholder Consent. The shareholder approval requirements of
Proposed Regulation sec. 1.280G-1, Q/A 7 shall have been met in respect of the
options granted under the Company Stock Plan.
6.3 Conditions Precedent to the Company's and Shareholders'
Obligations. All obligations of the Shareholders and the Company under this
Agreement are subject to the fulfillment or satisfaction, prior to or on the
Closing Date, of each of the following conditions precedent:
(a) Performance of Obligations; Representations and Warranties.
Acquisition and Lucent shall have performed and complied in all material
respects with all agreements and conditions contained in this Agreement that are
required to be performed or complied with by them prior to or at the Closing.
Each of the representations and warranties of Acquisition and Lucent contained
in Section 4 of this Agreement (i) to the extent it is qualified by Material
Adverse Effect shall be true and correct and (ii) to the extent it is not so
qualified by Material Adverse Effect shall be true and correct in all material
respects, in each case, on and as of the Closing with the same effect as though
such representations and warranties were made on and as of the Closing except
(A) for changes permitted by this Agreement and (B) to the extent that such
representations and warranties expressly relate to an earlier date, in which
case such representations and warranties shall be as of such earlier date.
(b) Opinion of Counsel. The Company shall have received the favorable
written opinion dated the Closing Date of Kelly, Hart & Hallman, special Texas
counsel to Acquisition and Lucent, and internal counsel to Acquisition and
Lucent, each in form satisfactory to the Company. The Company shall have
received a written opinion dated the Closing Date of Haynes and Boone, LLP,
counsel to the Company, addressing certain tax matters which opinion shall be in
form and substance reasonably satisfactory to the Company.
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(c) No Material Adverse Change. There shall have been no material
adverse change in the assets, business, financial condition or operations of
Lucent and no event or events shall have occurred that could reasonably be
expected to have a Material Adverse Effect on Lucent other than as a result of
(i) general economic conditions, (ii) business and economic conditions affecting
the dense wavelength division multiplexing industry or (iii) the announcement of
the transactions contemplated hereby.
(d) Employee Letter Agreement. Lucent shall have entered into a letter
agreement with the Company and the Shareholders regarding certain payments to
employees of the Company following the Closing Date, substantially in the form
of Exhibit G hereto.
6.4 Frustration of Closing Conditions. None of the Shareholders, the
Company, Lucent or Acquisition may rely on the failure of any condition set
forth in Section 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such
failure was caused by such party's failure to use reasonable efforts to
consummate the Merger and the other transactions contemplated by this Agreement
and the Escrow Agreement, as required by and subject to Section 5.8.
7. Survival of Representation and Warranties.
7.1 Representations and Warranties. The representations and warranties
of the Shareholders and the Company contained in this Agreement (including the
schedules to the Agreement which are hereby incorporated by reference) or in any
instrument delivered pursuant to this Agreement shall survive for 12 months
following the Effective Time, except that the representations and warranties of
the Shareholders contained in Sections 3.1(b) and 3.1(c), the last sentence of
Section 3.2(a) and Sections 3.32, 3.33 and 3.34 shall survive until the
expiration of the applicable statute of limitations. This Section shall not
limit any claim for fraud or any covenant or agreement by the parties which
contemplates performance after the Effective Time.
8. Indemnification.
8.1 Escrow Shares. As soon as practicable after the Effective Time, 10%
of the total number of shares of Lucent Common Stock to be issued in exchange
for the Company Common Stock (such shares as adjusted for stock splits,
combinations, stock dividends and distributions and together with any other
property issued in respect of such shares as a result of any of the foregoing
being referred to herein as the "Escrow Fund") shall be deposited with The Bank
of New York (or any other institution selected by Lucent), as escrow agent (the
"Escrow Agent"), such deposit to be governed by the terms set forth herein and
in the Escrow Agreement. The Escrow Fund shall be the sole and exclusive source
available to compensate Lucent for the indemnification obligations of each
Stockholder under Section 8.2(a), except that Lucent may elect not to have
recourse to the Escrow Fund for any claim of fraud or any inaccuracy in any
representation or warranty of the Shareholders contained in Sections 3.1(b) and
3.1(c), the last sentence of Section 3.2(a) and Sections 3.32, 3.33 and 3.34.
8.2 General Indemnification. (a) Subject to the limitations set forth
in this Section 8, the Shareholders will jointly and severally indemnify and
hold harmless Lucent and each Person, if any, who controls, may control or is
controlled by Lucent within the meaning of the Securities Act and their
respective officers, directors, employees, agents and advisors (each
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such indemnitee being referred to herein as an "Indemnified Person"), from and
against any and all losses, costs, damages, liabilities, obligations,
impositions, inspections, assessments, fines, deficiencies and expenses arising
from claims, demands, actions, causes of action, including, without limitation,
reasonable legal fees (collectively, "Damages"), arising out of (i) any
inaccuracy in any representation or warranty made by the Company or any
Shareholder in this Agreement or in any exhibit or schedule to this Agreement,
(ii) any Damages relating to Taxes of the Company that pertain to periods (or
that portion of any period) up to and including the Closing Date other than any
Taxes accrued or reserved for on the Current Balance Sheet, and (iii) any breach
or default by the Company or any Shareholder of any of the covenants or
agreements given or made by any of them in this Agreement or any exhibit or
schedule to this Agreement.
(b) Lucent and the Shareholders acknowledge that such Damages, if any,
would relate to unresolved contingencies existing at the Closing Date, which if
resolved at the Closing Date would have led to a reduction in the total
consideration that Lucent would have agreed to pay in connection with the
transactions contemplated hereby.
(c) Notwithstanding anything to the contrary contained in this
Agreement, solely with respect to any claim by any Indemnified Person for
indemnification under Section 8.2(a)(i) or 8.2(a)(ii) (other than any claim for
any inaccuracy in Section 3.13 or in the last sentence of Section 3.2(a)), such
Indemnified Person may not seek indemnification with respect to any claim for
Damages until the aggregate amount of all Damages for which all Indemnified
Persons are seeking indemnification under Section 8.2(a)(i) or 8.2(a)(ii) equals
or exceeds $500,000 (the "Threshold"), whereupon such Indemnified Person shall
be entitled to seek indemnification with respect to all such Damages that exceed
the Threshold. All Damages for which indemnification may be sought pursuant to
Section 8.2(a) (other than claims of fraud) shall not exceed the then aggregate
value of the Escrow Fund on the Closing Date, or following the first anniversary
of the Closing Date, the then aggregate value of the Escrow Fund at the time
such claim for indemnification is satisfied.
(d) In determining the amount of any Damage for which any Indemnified
Person may seek indemnification under Section 8.2(a)(i) or Section 8.2(a)(iii),
any materiality standard shall be disregarded.
(e) The indemnification provisions of this Article 8 are the exclusive
remedy for any Damages suffered by any Indemnified Person in connection with
this Agreement, except for Damages arising from fraud or any inaccuracy in any
representation or warranty of the Shareholders contained in Sections 3.1(b) and
3.1(c), the last sentence of Section 3.2(a), and Sections 3.32, 3.33 and 3.34.
The liability of the Shareholders to all Indemnified Persons for all Damages for
which indemnification is provided hereunder shall not exceed the Escrow Fund.
8.3 Claims Upon Escrow Fund. Subject to the provisions of this Section
8, if any Indemnified Person elects to satisfy any claims for Damages against
the Escrow Fund, such Indemnified Person shall make claims upon the Escrow Fund
by delivering to the Escrow Agent on or before the last day of the escrow period
of the Escrow Fund a notice signed by a representative of Lucent (a "Lucent
Notice") specifying in reasonable detail the individual items of Damages for
which indemnification is being sought, the date each such item was paid or
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properly accrued or arose, the nature of the misrepresentation, breach of
warranty or claim to which such item is related. Upon receipt by the Escrow
Agent of a Lucent Notice, the Escrow Agent shall, subject to the provisions of
Section 8.4, deliver to Lucent, as promptly as practicable, the number of shares
of Lucent Common Stock held in the Escrow Fund having a fair market value on the
date of such distribution, equal to such Damages. Concurrent with the sending of
any Lucent Notice to the Escrow Agent, Lucent shall provide a copy of such
Lucent Notice to the Shareholders.
8.4 Objections to Claims. (a) If any Shareholder shall object to a
Lucent Notice within the ten-day period after receipt thereof, then Lucent and
such Shareholder shall use their good faith efforts to resolve such dispute. If
Lucent and such Shareholder resolve such dispute, the parties shall deliver a
written notice to the Escrow Agent directing the delivery of the shares and
other property, if any, in the Escrow Fund as agreed between Lucent and such
Shareholder. The number of shares of Lucent Common Stock necessary to satisfy
the Damages specified in the applicable Lucent Notice shall not be released by
the Escrow Agent and shall remain in the Escrow Fund pending the resolution in
accordance with this Section 8.4 of any such objection.
(b) If Lucent and such Shareholder are unable to resolve such dispute
within 30 days after such Shareholder objects to such Lucent Notice, either
Lucent or such Shareholder, by written notice to the other and the Escrow Agent
may demand arbitration of such dispute. Any such arbitration shall be conducted
by such alternative dispute service ("Arbitration Service") as shall be
reasonably acceptable to Lucent and such Shareholder. The Arbitration Service
shall select one arbitrator reasonably acceptable to Lucent and such Shareholder
who shall be expert in the area of development and production of
microelectronics products. The decision by the Arbitration Service shall be
binding and conclusive and, notwithstanding any other provisions of this Section
8, the Escrow Agent shall be entitled to act in accordance with such decision
and make delivery of the Escrow Fund in accordance therewith.
(c) The arbitration shall be held in New York, New York. The costs of
any such arbitration shall be borne one-half for the account of Lucent and
one-half by the Shareholders (out of the Escrow Fund to the extent available
after all claims have been satisfied). Judgment upon any award rendered by the
arbitrator may be entered in any court of competent jurisdiction.
8.5 Third-Party Claims. If Lucent becomes aware of a third-party claim
which Lucent believes may result in a demand pursuant to this Section 8, Lucent
shall promptly notify the Shareholders of such claim, and the Shareholders shall
be entitled, at the Shareholders' expense (out of the Escrow Fund to the extent
available after all claims have been satisfied), to participate in any defense
of such claim; provided that Lucent shall control such defense, and shall have
the right with the consent of the Shareholders (which consent shall not be
unreasonably withheld) to settle any such claim (it being understood that no
such consent of the Shareholders shall be required where the third-party claim,
which Lucent proposes to settle could reasonably be expected to adversely
affect, in any material respect, the business reputation of Lucent or its
Affiliates, or the possible criminal liability of Lucent or its Affiliates or
any of their respective officers, directors or employees). In the event that the
Shareholders have consented to any such settlement, the Shareholders shall have
no power or authority to object under any
36
41
provision of this Section 8 to the amount of any claim by Lucent for indemnity
with respect to such settlement.
9. Brokers' and Finders' Fees.
9.1 Company. The Shareholders represent and warrant to Acquisition and
Lucent that no broker, investment banker or financial advisor other than Chase
Securities Inc. is entitled to receive a brokerage fee, financing commission or
other commission from the Shareholders in respect of the execution of this
Agreement or the consummation of the transactions contemplated hereby. The
Shareholders agree that if the transactions contemplated by this Agreement are
not consummated (other than as a result of a breach or default by Lucent or
Acquisition), they shall indemnify and hold Acquisition and Lucent harmless
against any and all claims, losses, liabilities, costs or expenses which may be
asserted against Acquisition or Lucent as a result of the Company's or any of
its Affiliates' dealings, arrangements or agreements with any such Person.
9.2 Acquisition and Lucent. Acquisition and Lucent represent and
warrant to the Shareholders that no broker, investment banker or financial
advisor is entitled to receive any brokerage fee, financing commission or other
commission from Lucent in respect of the execution of this Agreement or the
consummation of the transactions contemplated hereby. Acquisition and Lucent
agree that if the transactions contemplated hereby are not consummated (other
than as a result of a breach or default by the Company or the Shareholders),
they shall jointly and severally indemnify and hold the Shareholders and the
Company harmless against any and all claims, losses, liabilities, costs or
expenses which may be asserted against the Company or the Shareholders, as a
result of Acquisition's or Lucent's or any of their respective Affiliates'
dealings, arrangements or agreements with any such Person.
10. Expenses. Except as set forth on Schedule 10, each party hereto
shall pay its own expenses incidental to the preparation of this Agreement, the
carrying out of the provisions of this Agreement and the consummation of the
transactions contemplated hereby, whether or not the Merger is consummated. Any
tax, including, but not limited to sales, use, stamp or transfer taxes, and any
other filing or recording fees, if any, which may be payable with respect to the
consummation of the transactions contemplated hereby shall be payable as
prescribed by applicable law or regulation.
11. Press Releases. Except as required by law or SEC regulations or
Lucent's listing agreement with the New York Stock Exchange, Lucent, Acquisition
and the Company shall not issue any press release or otherwise make public any
information with respect to this Agreement nor the transactions contemplated
hereby, prior to the Closing, without the prior written consent of the other
parties to this Agreement. The Shareholders shall cause the Company to comply
with its obligations under this Section 11.
12. Contents of Agreement; Parties in Interest; etc. This Agreement and
the agreements, schedules and exhibits referred to or contemplated herein and
the letter agreement dated March 3, 2000 concerning confidentiality, as amended
(the "Confidentiality Agreement"), set forth the entire understanding of the
parties hereto with respect to the transactions contemplated hereby, and, except
as set forth in this Agreement, such other agreements and the
37
42
Exhibits hereto and the Confidentiality Agreement, there are no representations
or warranties, express or implied, made by any party to this Agreement with
respect to the subject matter of this Agreement and the Confidentiality
Agreement. Except for the matters set forth in the Confidentiality Agreement,
any and all previous agreements and understandings between or among the parties
regarding the subject matter hereof, whether written or oral, are superseded by
this Agreement and the agreements referred to or contemplated herein. All
statements contained in schedules, exhibits, certificates and other instruments
attached hereto shall be deemed representations and warranties (or exceptions
thereto) by the Shareholders, the Company, Acquisition or Lucent, as the case
may be.
13. Assignment and Binding Effect. This Agreement may not be assigned
by any party hereto without the prior written consent of the other parties;
provided, that Acquisition may assign its rights and obligations under this
Agreement to any directly or indirectly wholly-owned Subsidiary of Lucent, upon
written notice to the Company if the assignee shall assume the obligations of
Acquisition hereunder and Lucent shall remain liable for its obligations
hereunder. All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto.
14. Definitions. As used in this Agreement the terms set forth below
shall have the following meanings:
(a) "Accredited Investor" shall have the meaning set forth in Rule 501
of Regulation D under the Securities Act.
(b) "Affiliate" of a Person shall mean any other Person who (i)
directly or indirectly through one or more intermediaries controls, is
controlled by or is under common control with, such Person or (ii) owns more
than 5% of the capital stock or equity interest in such Person. "Control" means
the possession of the power, directly or indirectly, to direct or cause the
direction of the management and policies of a Person whether through the
ownership of voting securities, by contract or otherwise.
(c) "Benefit Plan" shall mean any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other material plan, arrangement or
understanding (whether or not legally binding) providing material benefits to
any current or former employee, officer or director of the Company.
(d) "best knowledge" in respect of any representation and warranty of
the Company set forth in this Agreement shall mean the actual and constructive
knowledge of the executive officers of the Company and employees of the Company
charged with responsibility for the particular matter which is the subject of
such representation or warranty.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Consideration Shares" shall mean the shares of Lucent Common Stock
received by the Shareholders in exchange for all the shares of Company Common
Stock issued and outstanding pursuant to Section 1.5(c).
38
43
(g) "Environmental Laws" shall mean all applicable federal, state,
local or foreign laws, rules and regulations, orders, decrees, judgments,
permits, filings and licenses relating (i) to protection and clean-up of the
environment and activities or conditions related thereto, including those
relating to the generation, handling, disposal, transportation or release of
Hazardous Substances and (ii) the health or safety of employees in the workplace
environment, all as amended from time to time, and shall also include any common
law theory based on nuisance, trespass, negligence or other tortuous conduct.
(h) "Final Determination" shall mean (i) a decision of the United
States Tax Court, or a decision, judgment, decree or other order by another
court of competent jurisdiction, which has become final and is either no longer
subject to appeal or for which a determination not to appeal has been made; (ii)
a closing agreement made under Section 7121 of the Code or any comparable
foreign, state, local or municipal Tax statute; (iii) any disallowance of a
claim for refund or credit in respect of an overpayment of Tax unless a suit
related thereto is filed on a timely basis; (iv) any final disposition by reason
of the expiration of the applicable statute of limitations; or (v) the actual
payment by the Company of Taxes.
(i) "GAAP" shall mean generally accepted accounting principles.
(j) "Hazardous Substances" shall mean any and all hazardous and toxic
substances, wastes or materials, any pollutants, contaminants, or dangerous
materials (including, but not limited to, polychlorinated biphenyls, PCBs,
friable asbestos, volatile and semi-volatile organic compounds, oil, petroleum
products and fractions, and any materials which include hazardous constituents
or become hazardous, toxic, or dangerous when their composition or state is
changed), or any other similar substances or materials which are included under
or regulated by any Environmental Law.
(k) "Indebtedness" shall mean as at any date of determination, the sum
of the following items of the Company, without duplication: (i) obligations of
the Company created, issued or incurred for borrowed money, including all fees
and obligations thereunder (including, without limitation, any prepayment or
termination fees arising or which will arise out of the prepayment of such
Indebtedness prior to its maturity and termination), (ii) obligations of the
Company to pay the deferred purchase price or acquisition price of property or
services, other than trade or accounts payable arising, and accrued expenses
incurred, in the ordinary course of business consistent with past practice,
(iii) the face amount of all letters of credit issued for the account of the
Company and all drafts thereunder, (iv) capital lease obligations of the
Company, and (v) any obligation guaranteeing any Indebtedness or other
obligations of any other Person (including any obligations under any keep well
or support agreements).
(l) "Liens" shall mean any mortgage, pledge, lien, security interest,
conditional or installment sale agreement, encumbrance, charge or other claims
of third parties of any kind.
(m) "Material Adverse Effect" on a Person shall mean (unless otherwise
specified) any condition or event that may: (i) have a material adverse effect
on the assets, business, condition (financial or otherwise) or operations of
such Person; (ii) materially impair
39
44
the ability of the such Person to perform its obligations under this Agreement;
or (iii) prevent or delay the consummation of the transactions contemplated
under this Agreement.
(n) "Permitted Liens" shall mean (i) Liens for taxes, assessments, or
similar charges, incurred in the ordinary course of business that are not yet
due and payable or are being contested in good faith; (ii) pledges or deposits
made in the ordinary course of business; (iii) Liens of mechanics, materialmen,
warehousemen or other like Liens securing obligations incurred in the ordinary
course of business that are not yet due and payable or are being contested in
good faith; and (iv) similar Liens and encumbrances which are incurred in the
ordinary course of business and which do not in the aggregate materially detract
from the value of such assets or properties or materially impair the use thereof
in the operation of such business.
(o) "Person" shall mean any individual, corporation, partnership,
limited partnership, limited liability company, trust, association or entity or
government agency or authority.
(p) "Purchaser Representative" shall mean any Person who satisfies all
of the conditions set forth in Rule 501 of Regulation D under the Securities
Act.
(q) "reasonable best efforts" shall mean prompt, substantial and
persistent efforts as a prudent Person desirous of achieving a result would use
in similar circumstances; provided that the Company, the Shareholders, Lucent or
Acquisition, as applicable, shall be required to expend only such resources as
are commercially reasonable in the applicable circumstances.
(r) "Regulation D" shall mean Regulation D under the Securities Act.
(s) "Subsidiary" of a Person shall mean any corporation, partnership,
joint venture or other entity in which such Person (a) owns, directly or
indirectly, 50% or more of the outstanding voting securities or equity interests
or (b) is a general partner.
(t) "Tax" (and, with correlative meaning, "Taxes" and "Taxable") shall
mean any federal, state, local, municipal or foreign net income, gross income,
gross receipts, windfall profit, severance, property, production, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or
add-on minimum, ad valorem, value-added, transfer, stamp, or environmental tax,
or any other tax, custom, duty, tariff levy, import, governmental fee or other
like assessment or charge of any kind whatsoever, together with any interest or
penalty, addition to tax or additional amount imposed by any governmental or
regulatory authority, domestic and foreign.
(u) "Tax Return" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
15. Notices. Any notice, request, demand, waiver, consent, approval, or
other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by telecopy (promptly followed by a
hard-copy delivered in accordance with this Section 16) or by
40
45
registered or certified mail (return receipt requested), with postage and
registration or certification fees thereon prepaid, addressed to the party at
its address set forth below:
If to Acquisition or Lucent:
Lucent Technologies Inc.
Microelectronics Group
2 Oak Way
Berkley Heights, New Jersey 07920-2332
Attn.: President
Telecopy: (908) 508-8398
with copies to:
Lucent Technologies Inc.
Microelectronics Group
2 Oak Way
Berkley Heights, New Jersey 07920-2332
Attn: Corporate Counsel, Microelectronics
Telecopy: (908) 508-8398
If to the Company:
Herrmann Technology, Inc.
4916 St. James Court
Mesquite, TX 75150
Attn: William Herrmann, Jr.
Telecopy: (972) 270-1135
with a copy to:
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, TX 75202
Attn: Stephen M. Pezanosky, Esq.
Telecopy: (214) 651-5940
If to the Shareholders:
Herrmann Technology, Inc.
4916 St. James Court
Mesquite, TX 75150
Attn: William Herrmann, Jr.
Telecopy: (972) 270-1135
with a copy to:
Haynes and Boone, LLP
41
46
901 Main Street, Suite 3100
Dallas, TX 75202
Attn: Stephen M. Pezanosky, Esq.
Telecopy: (214) 651-5940
or to such other address or Person as any party may have specified in a notice
duly given to the other party as provided herein. Such notice, request, demand,
waiver, consent, approval or other communication will be deemed to have been
given as of the date so delivered, telegraphed or mailed.
16. Amendment. This Agreement may be amended, modified or supplemented
at any time prior to the Effective Time by the respective Boards of Directors of
the parties hereto notwithstanding the approval hereof by the shareholders of
the Company or the shareholders of Acquisition, as applicable, except as
provided in Article 5.03(l) of the TBCA. Any amendment, modification or revision
of this Agreement and any waiver of compliance or consent with respect hereto
shall be effective only if in a written instrument executed by the parties
hereto.
17. Governing Law. This Agreement shall be governed by and interpreted
and enforced in accordance with the laws of the State of Texas as applied to
contracts made and fully performed in such state.
18. No Benefit to Others. Except to the extent expressly provided in
Sections 5.2, 5.3, 5.9 and 5.10, representations, warranties, covenants and
agreements contained in this Agreement are for the sole benefit of the parties
hereto, and their respective successors and assigns, and they shall not be
construed as conferring, and are not intended to confer, any rights on any other
Person.
19. Severability. If any term or other provision of this Agreement is
determined to be invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other terms and provisions of the Agreement shall
remain in full force and effect. Upon such determination, the parties hereto
shall negotiate in good faith to modify this Agreement so as to give effect to
the original intent of the parties to the fullest extent permitted by applicable
Law.
20. Section Headings. All section headings are for convenience only and
shall in no way modify or restrict any of the terms or provisions hereof.
21. Schedules and Exhibits. All Schedules and Exhibits referred to
herein are intended to be and hereby are specifically made a part of this
Agreement.
22. Extensions. At any time prior to the Effective Time, any party may
by corporate action, extend the time for compliance by or waive performance of
any representation, warranty, condition or obligation of any other party.
23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and the Company, the
Shareholders,
42
47
Acquisition and Lucent may become a party hereto by executing a counterpart
hereof. This Agreement and any counterpart so executed shall be deemed to be one
and the same instrument.
43
48
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed this Agreement as of the date first above written.
LUCENT TECHNOLOGIES INC.
By: /s/ John T. Dickson
________________________________
Name: John T. Dickson
Title: Executive Vice President
KOSU ACQUISITION INC.
By: /s/ Richard Bleicher
________________________________
Name: Richard Bleicher
Title: Vice President
HERRMANN TECHNOLOGY, INC.
By: /s/ William C. Herrmann
________________________________
Name: William C. Herrmann
Title: President
HERRMANN HOLDINGS, LTD.
By: /s/ William C. Herrmann
________________________________
Name: William C. Herrmann
Title: President of Herrmann
Management, Inc.,
General Partner
ANNEM INVESTMENTS, LTD.
By: /s/ William C. Herrmann
________________________________
Name: William C. Herrmann
Title: President of Herrmann
Management, Inc.,
General Partner
HERRMANN TECHNOLOGY TRUST
By: /s/ Linda Herrmann
________________________________
Name: Linda Herrmann
Title: Trustee
44
49
Glossary of Defined Terms
<TABLE>
<CAPTION>
Defined Term Location of Definition
------------ ----------------------
<S> <C>
Accredited Investor................................... Section 14(a)
Acquisition........................................... Preamble
Acquisition Common Stock ............................. Recitals
Adjusted Option....................................... Section 5.2
Affiliate............................................. Section 14(b)
Agreement............................................. Preamble
Annem................................................. Preamble
Arbitration Service................................... Section 8.4(b)
Articles of Merger.................................... Section 1.1(b)
Authorizations........................................ Section 3.12(b)
Benefit Plan.......................................... Section 14(c)
Benefits Date......................................... Section 5.9(a)
best knowledge........................................ Section 14(d)
Business.............................................. Recitals
Certificates.......................................... Section 1.8(a)
Cap................................................... Section 5.10(b)
Closing............................................... Section 1.1(b)
Closing Date.......................................... Section 1.1(b)
Code.................................................. Section 14(e)
Commonly Controlled Entity............................ Section 3.15(a)
Company............................................... Preamble
Company Common Stock.................................. Recitals
Company Stock Options................................. Section 5.2
Company Stock Option Notices.......................... Section 5.2(b)
Company Stock Plan.................................... Section 5.2
Confidentiality Agreement............................. Section 12
Consideration Shares.................................. Section 14(f)
Damages............................................... Section 8.2(a)
Effective Time........................................ Section 1.1(b)
Environmental Laws.................................... Section 14(g)
Escrow Agent.......................................... Section 8.1
Escrow Agreement ..................................... Section 6.1(e)
Escrow Fund........................................... Section 8.1
ERISA................................................. Section 3.15(a)
Exchange Act.......................................... Section 4.3(c)
Exchange Ratio........................................ Section 1.5(c)
Executive Employees................................... Section 3.16(a)
Final Determination................................... Section 14(h)
Financial Statements.................................. Section 3.5(a)
GAAP.................................................. Section 14(i)
Hazardous Substances.................................. Section 14(j)
Holdings.............................................. Preamble
</TABLE>
45
50
<TABLE>
<S> <C>
Immaterial Authorizations............................. Section 3.12(b)
Indemnified Party..................................... Section 5.10(a)
Indemnified Person.................................... Section 8.2(a)
Intellectual Property Rights.......................... Section 3.13(a)
Indebtedness.......................................... Section 14(k)
IRS................................................... Section 3.14
Laws.................................................. Section 3.2(a)
Liens................................................. Section 14(l)
Lucent................................................ Preamble
Lucent Common Stock................................... Section 4.2
Lucent Notice......................................... Section 8.4
Lucent Plans.......................................... Section 5.9(b)
Lucent Authorized Preferred Stock..................... Section 4.2
Lucent Junior Preferred Stock......................... Section 4.2
Lucent SEC Documents.................................. Section 4.5(a)
Material Adverse Effect............................... Section 14(m)
Merger................................................ Recitals
1999 Balance Sheet.................................... Section 3.5(a)
NYSE.................................................. Section 1.7
Outstanding Common Shares............................. Section 3.2.(a)
Patents............................................... Section 3.13(a)
Pension Plans......................................... Section 3.15(a)
Permitted Liens....................................... Section 14(n)
Person................................................ Section 14(o)
Plans................................................. Section 3.15(a)
Purchaser Representative.............................. Section 14(p)
reasonable best efforts............................... Section 14(q)
Registration Statement................................ Section 3.32
Regulation D.......................................... Section 14(r)
Restraints............................................ Section 6.1(d)
Right................................................. Section 1.5(c)
SEC................................................... Section 4.5(a)
Securities Act........................................ Section 3.32
Shares................................................ Section 3.2(a)
Shareholders.......................................... Recitals
Subsidiary............................................ Section 14(s)
Surviving Corporation................................. Section 1.1(a)
Tax................................................... Section 14(t)
Tax Return............................................ Section 14(u)
TBCA.................................................. Recitals
Threshold............................................. Section 8.2(c)
Trust................................................. Preamble
Welfare Plans......................................... Section 3.15(a)
</TABLE>
51
1
EXHIBIT 5.1
July 28, 2000
Lucent Technologies Inc.
600 Mountain Avenue
Murray Hill, New Jersey 07974
Ladies and Gentlemen:
I have acted as counsel for Lucent Technologies Inc., a Delaware
corporation ("Lucent"), in connection with the preparation of a Registration
Statement on Form S-3 (the "Registration Statement") to be filed by Lucent with
the Securities and Exchange Commission (the "Commission") pursuant to the
Securities Act of 1933 (the "Act"). The Registration Statement relates to up to
78,813,455 shares (the "Shares") of common stock, par value $0.01 per share (the
"Common Stock"), which were issued by Lucent pursuant to (i) the Agreement and
Plan of Merger, dated as of May 31, 2000, among Lucent, Goldfish Acquisition
Inc., a Delaware corporation and a wholly owned subsidiary of Lucent ("Goldfish
Acquisition"), and Chromatis Networks Inc., a Delaware corporation and (ii) the
Agreement and Plan of Merger, dated as of June 16, 2000, among Lucent, Kosu
Acquisition Inc., a Texas corporation and a wholly owned subsidiary of Lucent
("Kosu Acquisition"), Herrmann Technology, Inc. , a Texas corporation, Herrmann
Holdings , Ltd., a Texas limited partnership, AnnEm Investments, Ltd., a Texas
limited partnership and Herrmann Technology Trust, a complex trust established
under the laws of the State of Texas.
I have examined such corporate records, certificates and other
documents as I have considered necessary or appropriate for the purposes of this
opinion. In such examination, I have assumed the genuineness of all signatures
and the authenticity of all documents submitted to me as copies. In examining
agreements executed by parties other than Lucent, Goldfish Acquisition and Kosu
Acquisition, I have assumed that such parties had the power, corporate or other,
to enter into and perform all obligations thereunder and also have assumed the
due authorization by all requisite action, corporate or other, and execution and
delivery by such parties of such documents, and the validity and binding effect
thereof. As to any facts material to the opinion expressed herein which I have
not independently verified or established, I have relied upon statements and
representations of officers and representatives of Lucent and others.
Based on such examination, I am of the opinion that the Shares have
been duly authorized for issuance and are validly issued, fully paid and
non-assessable.
I hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement and to the reference to me and this opinion in the proxy
statement/prospectus that forms a part of the Registration Statement. In giving
such consent, I do not hereby admit that I am in the category of persons whose
consent is required under Section 7 of the Act.
Very truly yours,
/s/ Jean F. Rankin
1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-3 of our report dated January 20, 2000
relating to the consolidated financial statements and financial statement
schedule which appears in Exhibit 99.1 to Lucent Technologies Inc.'s Current
Report on Form 8-K dated February 10, 2000. We also consent to the reference to
us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
July 28, 2000
1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
WHEREAS, Lucent Technologies Inc., a Delaware corporation (hereinafter
referred to as the "Company"), proposes to file with the Securities and Exchange
Commission, under the provisions of the Securities Act of 1933, a registration
statement or registration statements (on Form S-3, Form S-4, Form S-8 or any
other appropriate Form) with respect to the issuance of common shares, par value
$.01 per share, of the Company (including the related Preferred Share Purchase
Rights), in connection with the acquisition by the Company of Chromatis Networks
Inc.; and
WHEREAS, the Company proposes to file with the Securities and Exchange
Commission, under the provisions of the Securities Act of 1933, a registration
statement or registration statements (on Form S-3, Form S-4, Form S-8 or any
other appropriate Form) with respect to the issuance of common shares, par value
$.01 per share, of the Company (including the related Preferred Share Purchase
Rights), in connection with the acquisition by the Company of Herrmann
Technology, Inc.; and
WHEREAS, the undersigned is a director and/or officer of the Company,
as indicated below his or her signature:
NOW, THEREFORE, the undersigned hereby constitutes and appoints Deborah
C. Hopkins and James S. Lusk and each of them, as attorneys for and in the name,
place and stead of the undersigned, and in the capacity of the undersigned as a
director and/or officer of the Company, to execute and file any such
registration statement with respect to the above-described common shares and
thereafter to execute and file any amended registration statement or statements
with respect thereto or amendments or supplements to any of the foregoing,
hereby giving and granting to said attorneys, and each of them, full power and
authority to do and perform each and every act and thing whatsoever requisite
and necessary to be done in and about the premises, as fully, to all intents and
purposes, as the undersigned might or could do if personally present at the
doing thereof, hereby ratifying and confirming all that said attorneys may or
shall lawfully do, or cause to be done, by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
this 7th day of June, 2000.
By: /s/ PAUL A. ALLAIRE By: /s/BETSY S. ATKINS
---------------------------- ---------------------------
Name: Paul A. Allaire Name: Betsy S. Atkins
Director Title: Director
2
EXHIBIT 24.1
By: /s/ CARLA A. HILLS By: /s/ RICHARD A. McGINN
---------------------------- ---------------------------
Name: Carla A. Hills Name: Richard A. McGinn
Title: Director Title: Chairman of the Board and
Chief Executive Officer
By: /s/ PAUL H. O'NEILL By: /s/ HENRY B. SCHACHT
---------------------------- ---------------------------
Name: Paul H. O'Neill Name: Henry B. Schacht
Title: Director Title: Director
By: /s/ FRANKLIN A. THOMAS By: /s/ JOHN A. YOUNG
---------------------------- ---------------------------
Name: Franklin A. Thomas Name: John A. Young
Title: Director Title: Director
By: /s/ DEBORAH C. HOPKINS By: /s/ JAMES S. LUSK
---------------------------- ---------------------------
Name: Deborah C. Hopkins Name: James S. Lusk
Title: Executive Vice President and Title: Senior Vice President and
Chief Financial Officer Controller